There are probably options in the system's settings to make it fit your current monitor. Personally, though, I think a widescreen display is worth it for gaming.
Your options are either a 1080p monitor or a cheap 720p television, I reckon. A TV will be easier to find, since they don't really sell TVs that won't cover everything a PS3 needs these days.
If you want a monitor, it's a bit trickier. The PS3 uses HDMI primarily, and this will play best with most monitors. The biggest thing to keep in mind is that HDMI carries audio, so unless you have a sound system that'll use the optical audio port, you'll need a monitor that'll deal with your audio in some way.
Your options are built-in speakers or auxiliary out. Built-in will sound a bit like crap; auxiliary out will be harder to find.
Personally, I'd recommend a monitor. Image quality
tends to be better in monitors, because they're made for displaying fine text. The problem is that monitors that handle audio can be a bit hard to find. I was surprised to find this out, but even 720p TVs are more expensive than cheaper 1080p monitors.
To cover every base,
this doesn't have any glaring issues that I can see. It's got HDMI, speakers, and what appears to be audio out so that you can hook up some nicer speakers. It's not top-of-the-line or anything, but it's fairly standard and will do you well. If you shop around a bit, of course, any questions can be gladly answered.