Basicly every PC Shooter, which released by 2002 and later, that sold more than Killzone or Resistence proves you wrong.
And WTF Upscaling? A PC game don't create graphics and then let the user decide the scale of them. Setting up resolution in a game is indeed setting up the output resolution for your graphic card.
Oh and btw your emulator thingy is not upscalling of the output but of the textures to fit the screen size(not resolution). Which is equivalent to upscalling if you look at 2d graphics. But there is no upscalling of 3d graphics b/c they are calculated and rendered in your chosen resolution.
This is prooven if u look at emulated ps2 or n64 games. The polygon structure is very sharp but the textures are "upscaled". Then u have to consider that these textures are sometimes in a much bigger resolution than needed if they are not orthoganal to the viewpoint. If thats the case you absolutely increase the visual quality of the game with an emulator. Examples are emulated SSMB and MP3 on dolphin emulator.
I'm not sure how great Quake 3 sales are, but even this old game supported 1600x1200 resolution and through custom regestry entries you could make it full HD wide screen or even more.
