Dispaly becomes "jagged" with Show Desktop Icons Turned Off

I'm running XP Pro SP1, an ATI Radeon 9800 Pro w/128Mb RAM, 2.66 Ghz Pentium, 1Gb RAM, 19" trinitron monitor @ 1024x768 and 32bpp color.

Whenever I run with Show Desktop Icons turned off, wallpaper images with straight line edges appear "jagged ". With Show Desktop Icons selected, the same wallpaper appears perfectly. I can't find any reference to this type of problem anywhere. Any ideas?

Thanks in advance for any help provided.

 

I'm not in front of XP at the mo, so can't suggest my custom settings for you. But as you're running a 19" monitor have you tried 1152x864 resolution that I find works well with XP when you're using the blue, green or silver theme. You have updated your Radeon drivers, although that shouldn't have much effect on 2D desktop graphics. Check some of the tweaking options in whatever applet comes with the Radeon driver install.