[Guest001]

hw3d_deviceno = 2
Implies you have more than one display system?

hw3d_res Display values are set to 0
Should be 1

hw3d_guid and hw3d_name Not showing
I think that's because you're using an onboard GFX system which the game cannot detect.

Try this, hopefully it will force the resolution for now. Select the 1024 option if you get past the test.

Find the position of this script in the CFG and replace the existing.
Then set the dflw.cfg file properties to read only and let's see what happens.

hw3d_res640x480 = 1
hw3d_res800x600 = 1
hw3d_res1024x768 = 1
game_res = 6
no_anim = 1
window_size = 1

Note:
Did you say the Editor is doing it as well? - That would mean it's probably not the game.