I changed the shadow quality and resolution (1280 X 1024) in the .ini and saved the file. When I go to the game, it reverts to 640 X 480. I go back and check the .ini file again and the changes I had made arn't there. What am I missing? I have also gone into the properties of the .ini file and made it 'read only' with no luck.

Why? Just change those values in the game-menu. (If your hardware supports it though).

That resolution is not in the game menu. Also in the .ini file you can change the quality of the shadows for a given level of detail. I can have it on level 2 shadows but reduce the level of detail for the shadow from 1024 (default) to 512 for better fps. This info is from the tweakguides website.