Hmm, it looks to me as if the only supported resolutions for your xserver are 1280x1024x16 and 1280x1024x24. Since the "DefaultDepth" is 24, your default resolution is 1280x1024x24.
Now, a look at the specs of your monitor
(found here) shows me, that the possible resolutions for that monitor are:
1280 x 1024 (SXGA)
1024 x 768 (XGA)
800 x 600 (SVGA)
640 x 480 (VGA)
So it is not possible to switch to a higher resolution, because your default resolution is already the highest possible supported by your monitor (and even if your monitor supported a higher resolution, it would still be out of range for the xserver, because it is not specified in your xorg.conf).
But maybe I misread the problem (again) and you know that already. So I will now just tell you my experience with xserver-xorg:
I use Xorg with XFree86-VidModeExtension (in combination) too and changing resolutions (to higher or lower resolutions of my current desktop resolution) works fine, so I think, that your problem is not using XFree86-VidModeExtension in combination with Xorg.
The "Screen" section of my xorg.conf:
Section "Screen" Identifier "Default Screen" Device "AsusN6200" Monitor "EizoFlexScanF67" DefaultDepth 24 SubSection "Display" Depth 1 Modes "1024x768" "800x600" "640x480" EndSubSection SubSection "Display" Depth 4 Modes "1024x768" "800x600" "640x480" EndSubSection SubSection "Display" Depth 8 Modes "1024x768" "800x600" "640x480" EndSubSection SubSection "Display" Depth 15 Modes "1024x768" "800x600" "640x480" EndSubSection SubSection "Display" Depth 16 Modes "1024x768" "800x600" "640x480" EndSubSection SubSection "Display" Depth 24 Modes "1024x768" "800x600" "640x480" EndSubSectionEndSection
I can switch back and forth between the different screen resolutions without a problem (btw. you can use 'Ctrl-Alt--' and 'Ctrl-Alt-+' to switch the xserver to a higher or lower resolution respectively as a shortcut).
To be able to use different resolutions, they must all be listed in the 'Modes' field of the current specified depth or you'll get an "out of range" error.
I had a lot of trouble with my xserver when I started with linux, mostly because I wanted to do everything by myself (e.g. fill out all the conf files by hand). So if you're fairly new to linux, I would suggest using your package management system to re-/configure the packages (e.g. 'dpkg-reconfigure xserver-xorg'), instead of editing the config file directly by hand; this can save you a lot of trouble unless you know exactly what you're doing.
I hope this is somehow helpful. ;)