Hickory: You do not need the widescreen mod with BGT, because you are running under the BG2 engine. Just use the config program as suggested, and use 1024x768 resolution: you don't need anything more than that with Baldur's Gate, because it look damn awful.
I would agree that it's not necessary, however I would disagree with your analysis of "terrible". Running a widescreen monitor with native resolution of 1680x1050, and then trying to run the game at 1024x768 will make it look terrible, as there is no easy way to convert between those two aspect ratios.
WallOfTerror - I have the same setup as you, and am successfully running BGT with the widescreen mod in 1680x1050. I followed the install order found
here and everything worked fine the first time, no problems, no crashes, no graphic artifacts.
Can you comment on what, exactly, you installed, and the order in which you did it?