Hmmm... I've used mine with both - MacBook Pro (Late '07 w/ 8600M) and a MacPro with the Nvidia 8800 at 1600x1024 in digital mode via multilink with no issues. Autodetects it, sets the color correctly, etc.
I was going to try my sw1600 when I get a chance to bring it home from work. I think the analog/digital switch on the back of the multilink is probably the ticket for the OP.
There's a chance that it might actually work in analog and not digital though. I have a mini connected to my LCD tv and with dvi (dvi-hdmi cable) only does full res interlaced, works fine (well, slight ghosting) with a VGA cable.
I have a Geforce 7300GT. I also found this http://www.buysgi.com/products/legacy/multilink/mac_faq.html. Could it be that it still doesn't work? Also found something about having to change some id in the driver but that was for OSx86. It works great in analog mode but in digital it behaves really weird.
I tried mine with both digital and analog and again, no problems.
I wonder if it has to do with the era of the multilink perhaps? I have an early monitor with one of the later multilink adapters. I find the picture quality better with the Multilink digital and it's worked with 10.4 and 10.5....
Like creepingfur, I have an older monitor (with spider logo) and a later multilink on my Intel Mac Mini, it works at the native resolution without any problem using the DVI connection. Same with my MacBook Pro when I tried that.