Instructions
Select "Video Options" in the "Options" menu of KOTOR II, accessible through the main menu.
Set "Resolution" to your highest available option. This cannot exceed your monitor's resolution.
Select "High" under "Texture Pack."
Click the box beside "Vsync." This option forces your computer to wait to display an image until the entire frame has loaded, preventing problems like screen-tearing. This requires a fair bit of processor power, so you should use it only if your computer can handle it.