That is not what my drop down looks like at all. Plus what you show does not detail how you are saving it. MPEG-4 or WMV. On the editing screen there are large buttons for "Burning" Exporting" This is where you should be able to select formats and resolution. I am not at that computer, later I will try and show screen shots of what I have.
Why not? Of course you can! And you should do it because the options should read as I showed you.
And you shouldn't use the export button in the top right corner of the screen, they're bad as they don't allow you to change any settings. You'll only get the full options via the menu "file" and "export".