It's not "hardcoded into the game".
See: Emulators
Old games are set to their original resolution when played on new systems because - shocker! They look best in their original, intended resolution!
All you get from upping the resolution of old games is a lot more clarity on the horribly low-poly models and horribad textures which are normally covered up nicely by the low resolution.
Gotta disagree, I think most games of that era that also had a PC version benefit today from having the PC version, over the release resolution on consoles. Even PS2 games, I know replaying GTA Vice City on PC today is a much better experience. It would be kinda cool if 3D console games always had that flexibility of PC games.
At least from 360 forward games can all be displayed at a nice resolution.
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