Your desktop size is always at least the size of your highest resolution
allowed under your XF86Config file. So if your highest is 1280x1024, your
desktop size will be at least that big, even if you usually only use
800x600. What you can do is to comment out the higher resolutions in your
config file, then your desktop size will be decreased (and of course you
then won't be able to switch to higher resolution until you change the
config and restart X).
As a side note, to increase your desktop size to be larger than your max
resolution, use the Virtual option in your XF86Config file in the
subsection "Display". 'man XF86Config' for more info.
- Ken