I've tried the "Chronicles of Inssmouth tech demo" and it's made with 3.4.0.6 (I can tell from the version label in the new winsetup.exe, which is great, by the way). I run Direct3D9 with "max fit". The game is 320x200, and yet the sprites appear as hi-res.
I'm not sure if it's the engine displaying this old, awkward behaviour again like it used to, or if it's the guy who made the game who caused that by faking 320x200 in hi-res. Winsetup says the game is 320x200 but the first image seen in the game (the maker's logo) is hi-res. I'm confused.