any resolution that is non-native, will be interpolated by the monitor. Interpolation has varying degrees of quality depending on the brand monitor. One thing is for sure is that the LCD will never look as good in a non-native resolution. Some interpolation is downright crappy.
As for the ms. Many 17"+ LCD's are reaching 20-25ms response times with very little ghosting. Some state 20ms but really aren't. Most brands/manufacturers are very unclear about this and info from the brand company and the actually LCD panel manufacturer can vary.
If you are mainly gaming in demanding FPS games, then CRT's are still the way to go. It all depends on when you are willing to take the trade-off for a snazzy space saving LCD. It all depends on your idea of quality. I know I see the difference between a 75hz, 85hz, and 95hz CRT refresh rates while others see nothing. I also like to work in 1024x768 for 19" CRT's. Forcing me to 1200x1024 or higher to see the native resolution is not my idea of a viable monitor. That to me is trading clarity eye strain for size eye strain.
Due to the LCD's cell technology, I also don't foresee any significant change in the native resolution problem as well. They may make 5ms response LCD's eventually but if I have to squint to see the type, I'm not buying it. Plasma's are no real hope either since they can't even go down to the detail (pixel size) of LCD's. They just display colors better.