Your monitor has a default display resolution and you should use that. They perform best at those settings.
16X9 is the ratio of left -> right compared to top -> bottom. You don't set it as a resolution of 1600X900.
But, 1600x900 is 16:9 just like 1920x1080.
What type of monitor is this so we can look it up to make sure you have the right settings in place?
The display is an Asus 24": http://www.newegg.com/Product/Product.aspx?Item=N82E16824236049&Tpk=asus%20vw246
I always keep the display at the native resolution. I only wanted to back off a bit in one game to gain a few more fps. I can go to other rez's such as 1360x768, 1366x768, 1280x720, etc. But not the one that is an actual 16x9 ratio: 1600x900.