This, the next exciting story in my Adventures With the Thinkpad T61 At Work (TM)  =;).... So I got a really sweet-looking IOGEAR 4-port USB KVM Switch at work. But when I plugged it into the T61, although the nVidia driver was able to find the external display (auto-detect button thingey), it only gave me 2 options for resolution, the larger of which was 640x480, which obviously is rubbish. So I stumbled across this helpful ubuntu page which gave me the clue I needed:

It would seem that xorg cannot detect the possible resolutions when using the "nvidia" driver. For me, the only resolution I could use was my LCD's native resolution (1680x1050).

Here's how you fix this:

1) Make a backup of your /etc/X11/xorg.conf as shown in the previous examples

2) Open /etc/X11/xorg.conf as shown in the previous examples

3) Add the following line to your existing "Screen" section:

Option "UseEdidFreqs" "false"

If all else fails, try running the following command:

sudo nvidia-settings

Under Video Configuration set your resolution and refresh rate, click apply, then save X Config.

I added the UseEdidFreqs as false Option, restarted X, and am now happy once again.  Hope this helps the next poor soul who hits this...  =:)