Great post, Dave, fully supported!
Until February/March 2014, Google provided the browser sizes in queries from image search results (often, not always!). I collected these data and evaluated them until March.
The first quartile (width) was 1,152px in February and the average 1,313px. The third quartile (75% position) was 1,600px.
It makes perfect sense to support 1,024px as a) this is still a common size and b), many users don't use browser windows in fullsize, because some websites return unreadably long text lines then. I prefer to browse at 1,024px outer width, too.
If I remember well, users get distracted if they get too much lateral extra input and have more difficulties to concentrate on the main content.
Unfortunately, even Google has a lot of pages that cannot be read without horizontal scrolling at 1,024 × 768px and even some that cannot be read at all at this size. The nowadays often repeated cookie disclaimer in Europe cannot be accepted at 1,024px width as you will never reach the "Got it" button (shame!).
As for the 5%: This is a huge amount. Don't waste the user experience in these cases. It should not matter which device a user has or which resolution, what counts is that almost every user will be satisfied. The same is valid for outdated browsers and User agents. You don't have to provide the full set of sophisticated features for them, but give them a reasonable surfing experience. And for the drop below 1%: That seems to be a good point to move the focus to higher grounds.
Regards, Thomas