You may need to set the desktop resolution to 1024x768 or higher first, before asking allegro to create a 1024x768 resolution display. The problem may also be an unsupported color depth. Are you using GFX_WINDOWED? That would fail because the window would be larger than the desktop.

You can query the supported resolutions through get_gfx_mode_list. See if 1024x768 is listed as a supported resolution. I know on my computers with allegro 4 that higher resolutions than the desktop resolutions are not seen. If you switch into a higher resolution desktop mode first it may succeed.

Those are my only ideas for now.

A good practice is also to try setting a resolution and check if that fails, then try a few other resolutions as fallbacks until either the resolution is changed successfully or there are no more fallback resolutions left. That's basically what I did in my Allegro 4 Tetris game. When setting the resolution failed, the game tried a few different other combinations of resolutions and display modes until finally trying 640x480 in windowed mode, which should almost always work, unless your computer is, like, more than few decades old. Of course you'll need to rescale your game appropriately, but that isn't too hard.