Yabause can do it, but it runs most games very buggy. You can't really upscale the 3d graphics on the Saturn, the machine uses a very nonstandard way of rendering graphics. Using any sort of upscaling will get you even more glitches.
It is unlikely to change since the limitation is on the Saturn side. Upscalers won't make games run in higher internal resolutions, which is what OP wants.
Druid, care to explain how the saturn does 3d so that it's hard to rander to higher resolution? Is it like doing 3D via 2D tricks?
I believe the Saturn doesn't actually have any hardware capability for 3d - it's all done in software. Also, quadrilaterals were used as the geometry primitive (instead of triangles). Didn't Model 1 hardware also use quads? Perhaps they wanted to mimic it?
As far as I know the only real quirks with the Saturn hardware is the use of quads instead of triangles and it has a mad number of processors. Neither is really an issue for rendering at a higher resolution in a software emulator, but the complexity of the system as a whole is definitely one of the biggest reasons that Saturn emulation isn't more mature.