Hmm. I don't think this is actually an xserver bug.
If you look at your xrandr output, you can see that a wide range of
resolutions have been properly detected. "Mirror" means that the system
should use the highest resolution common to both displays, and you can
see in the xrandr output that the only resolution higher than 1024x768
that the LVDS supports is 1280x800. The VGA doesn't support that mode,
so 1024x768 is the highest resolution they can both display.
It's certainly possible to configure a "clipped" display like you
describe with the xrandr command line tool, so both the things you
describe in your previous comment can be done with Xorg. So maybe what
you want to do is file a Wishlist bug against Screen Resolution (package
gnome-control-center) to have such features added to the GUI.
** Changed in: xorg-server (Ubuntu)
Status: New => Won't Fix
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Laptop external screen resolution wrong
https://bugs.launchpad.net/bugs/273543
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