I created a 800×1280 emulator (for galaxy note), and write an application for it.
The prototype UI created by photoshop is 800×1280 , you can see the zoomed out picture:

It’s width is 800px and height is 1280px.
I don’t have a 800×1280 device, but I have a 720×1024 one(which is smaller than galaxy note), you can see the real application captured from my android pad:

But when I deploy it into a 800×1280 emulator, it becomes:

You can see the left side panel looks smaller and the space is not enough to display those text.
The settings for the 800×1280 avd is:

But why it looks smaller than a 700×1024 pad?
The density of the LCD that android system understands is dp (density independent pixels) the formula for calculating the dp is px=dp * (dpi / 160) so if you set the physical dpi of the screen to 160 dpi. One physical pixel is equal to dp and hence your resolution appears correctly. What happened earlier was your LCD density was 320 dpi which means one physical pixel was equal to 2 pd so everything appeared expanded. I hope you understood the reason now. 🙂