Since you've got a 17" it's good comparison material. A 20" will display all pixels just as small as you see now, except there's more of them (hence the bigger size). A 22" shows just as many pixels as a 20" does, but it's bigger. Result? The pixels are displayed bigger.
Think for yourself if you're comfortable about your position from your screen and the size of the fonts, icons, bars, etc. when you're running 1280x1024 on your 17". If you think it's just fine, a 20" might be the best option. If you wouldn't mind the pixels being a little bigger, a 22" would be a bigger screen for relatively little money extra. I personally prefer 22" because I'm short sighted and I like the pixel map being a bit larger.
A widescreen monitor usually won't stretch unless you instruct it to. If it can't run a widescreen resolution, it can add black bars on the sides.
Oh, and Samsung monitors are great to go by. They're the biggest thing in Europe.