I'm running LW 4.0 through Amiga Forever 2006. It's extreamly fast. One of the only reasons I got AF was to run LW.
Windows XP screen setting is 1280x1024.
WinUAE host display is set at 800x600.
Amiga screen setting is 1152x864 32bit.
LW screen, 672x432 8 colors.
The LW interface takes the whole screen with about an inch and a half on the left edge of the interface that is the LW interface grey. The remaining LW screens do what you state. I'd like to get the LW screen into a bit higher resolution also. Will be dinking around with the display setting some more, as I said, LW through WinUAE/Amiga Forever is scary fast. I'm running an Athlon 64 x2 with a gig of ram and ATI integrated Radeon Xpress.