I've now got it working perfectly. I copied the install folder off my windows main and put it in ~/.wine/Program Files/Diablo 2/ folder. compatibility to xp, with wine setting to allow directx to control mouse, and allow windows manager to control windows. I only have 1 taskbar (at the top), and i set this to hide in side tab (or whatever it is).
now if you run DiabloII.exe with a "-window" added to the name in the exe properties; and click the side tab to hide your taskbar before you run the exe, then the 800x600 resolution should be displayed perfectly. the cinematics are smaller, but i'm pretty sure their res is 640x480 so it makes sense.
Now my biggest problem it to try and actually listen to my lectures instead of playing diabo!
oh just a quick note - when installing diablo on your windows pc, make sure you do a full install. after you install lod and crack it, open up the expansion cd is file browser and copy over any .mpq files to your diablo directory (it should have installed about half of them, but you need them all. now diablo is fully independent and you can take it with you.
Next thing to try is see if it can be played off usb....but i think i'll leave that for somebody else