Honest opinion, it's better not to scale the entire car to 1280x1024, for although doing so appears to offer the correct aspect ratio, in actual fact different parts of the skin are stretched by different amounts to make the skin fit the model. For instance the ever popular FZR model distorts the texture quite a bit more at its flared rear arch than it does on it's bonnet [hood].
I would tell you that the best way to achieve the correct aspect ratio is to compress every decal in the horizontal plane, but not the vertical plane, and to check the skin in the CMX viewer frequently, which will tell you whether or not you've got it right.
As for a sharp crisp look, well the bigger the decal is to begin with, the better, since you just shrink it to the size you want it, giving the false impression that it's better quality than it actually is. Increasing the size of decals isn't a great idea, since unless they're vector graphics and you're using something like Illustrator, they will begin to pixelate. It is better to attempt to recreate a decal than it is to scale it to sveral times its orginal size. If using photoshop then applying the unsharp mask filter to individual decals can also help.