My device has a resolution of 1024x600, which I would like to see scaled to accomodate a larger virtual resolution. Let's say we go up to 1536x900 (150%). I try the following:

xrandr --output LVDS1 --mode 1024x600 --scale 1.5x1.5

This mostly works with the exception that the cursor will not reach beyond the original 1024x600 frame. In other words, the new desktop area is not clickable/accessible.

Another method I've tried is:

xrandr --output LVDS1 --mode 1024x600 --fb 1536x900 --panning 1536x900

This gives me access to click anywhere within the larger desktop, however, it doesn't all fit on screen. I've tried omitting the "--panning 1536x900" part, but then it doesn't change anything.

Any ideas?

Don't change the screen resolution.

Use a smaller font instead, reduce the height of your panel & window decorations.

Or maybe change the DPI. Most people want to make text bigger on HiDPI screens, but the opposite should also work.
Maybe this.

Thanks for the suggestion, however, there are programs I would like to run that wont open on a display smaller than 1048x768, so the DPI/Font settings don't quite cut it.

In the link, most of the methods discussed are specific to the Cinnamon environment... which is just too resource hungry for this machine. I would prefer to stick to XFCE or LXDE so I have a somewhat responsive machine.

Then, afaics, the 2nd method you tried is your only option.

Essesntially it always comes down to xrandr under Xorg - no matter which DE you use.

Some programs open screens larger than your display, but if you then 'open fullscreen' they should fit, allowing access to dialog boxes that were hidden off screen.

I was ultimately able to get it to display like I wanted without the boundary issues by doing:

xrandr --output LVDS1 --mode 1024x600 --fb 1536x900 --panning 1536x900 --scale 1.5x1.5

Setting the scale option to the same dimensions as the panning option was key to reclaiming usable desktop space.