That line indicates that you are not running Nestopia in full-screen mode. The resolution you pick in the video settings dialog only applies to fullscreen mode. You have to switch Nestopia to fullscreen mode by using View->Fullscreen from Nestopia's menu or by pressing ALT+ENTER.
My PC GA-X58A-UDR3 i7-920 @ 3.2GHz 8GB DDR3 ATI Radeon HD 4890 Win7 RTM x64