This probably applies to both Vista's built-in viewer and Windows Live one. The slideshow viewer would lower the resolution if it thinks your computer can't handle the details smoothly. There are plenty of ways for it to think wrong, and it did in my case. My setup: Vista x64 on Q6600/2GB with Radeon HD 2400/256 MB, 1920x1200. Graphics score: 3.9. The viewer apparently thinks it's too low. So it dropped the resolution to 1280 x 800 I think.
There's a way to force it to use the screen resolution and it worked for me fine. Playing was smooth and nothing blew up. :)
See the tip here:
or KB930102. Basically it's setting this DWORD value HKEY_CURRENT_USER\SOFTWARE\Microsoft\Windows Photo Gallery\SlideShow\WinSATScore = 500.