I have installed the latest beta update for Worms Armaggedon, and for some reason the game will not display the maximum 1280 x 1024 resolution that the monitor can do when I set it to that, instead defaulting to what looks like a 16:9 ratio with black bars (I can only assume then this is possibly 1280 x 960, or 1280 x 800).

Any ideas as to why this could be possibly happening?

EDIT - Ah ok, this is only for Crazy Crates training it seems, is it deliberatly set to widescreen then?

It will display like that for any cavern map because maps are only 696 pixels in height. It can't display more than the map's height on your screen.