I know sometimes your problem happens, but I don't know what causes it, and how to solve it.
However, editing PsuIlluminus.ini should works. If it doesn't, it's because you're not changing the correct one (by default, C:\Users\[your windows username]\AppData\Local\SEGA\PHANTASY STAR UNIVERSE Illuminus\PsuIlluminus.ini), but the useless one located in the game directory.
RESOLUTION=
0 : 640x480
1 : 800x600
2 : 1024x768
3 : 1280x960
4 : 1280x1024
5 : 1280x720
That said, you should give a look at the following thing :
archives/forums/comments.php@DiscussionID=29&page=1.html#Comment_4448