Have the same issue. I only can choose between windowed and borderless window.
I have Win7 (pro, x64) also. I think I read at steam forums that those who have this problem also run Win7.
I have a single 1440p monitor and play with 1440 resolution. When I choose a lower resolution like 1080 I only get a smaller window (see my destkop in background). Normal behaviour from Windows point of view I guess, but no way to play it that way (would like to reduce resolution since I have an older PC setup, but with no full screen option I can't).