Ok looks like i fixed that too in PicassoTNG
So, are you back to where you want to be?
If not, here is something you might try. Move all the monitor drivers, EXCEPT NTSC, PAL, & PicassoIV, from SYS:DEVS/Monitors to SYS:Storage/Monitors.
I have not messed with this for a long time, but it seems some of the original Commodore monitor drivers, if loaded at startup, prevent Picasso working properly. Not sure it's true, but I was told this 5 years ago.
My SYS:Devs/Monitors drawer only has the exceptions listed above in it, not all possibilities.
Naturally, after moving things around, reboot. Then try to run Picasso96Mode in Prefs and see if you can get the desired res back.
EDIT: Gee whiz. How many posts are you running about this?