I had several different versions of Freelancer, one was an ISO version and the other was an expended version ready to play. So, initially I just coppied the expended version to the directory where I wanted Discovery to go. This approach worked but caused above mentioned issues. After that I decided to delete the folder as well the folders in documents. After this I mounted the ISO and installed Freelancer in the folder where I wanted the Discovery to go. Next, I copied the zipped Discovery file in same directory and extracted it there. That did the trick and all issues went away, although, I am still not able to change the resolution, but the resolution matches my desktop and works well, like it supposed to. Hope this will help some people.
