Gateway NX860 Model #M685 T5500 Widescreen distortion...

When watching DVDs in full-screen mode (monitor is a 17" WXGA Widescreen (1440 × 900 Max Res)), I get an intolerable degree of distortion, hazy & gritty & obviously showing the digital grid. Game-playing & watching DVDs in centered small-screen mode is much better.
With all the praise this laptop got in the reviews, I would think the full-screen DVD graphics would be much better. No amount of adjustments in any video playing system (Windows Media, Real Player, etc.) has helped. Is this normal? Is this fixable by myself, or should I send it back to the dealer? Thank you for your help.

Specs are-
Model: Gateway NX860
Display: 17" WXGA Widescreen (1440 × 900 Max Res)
Processor: Intel Core 2 Duo T5500 (1.6GHz)
Memory: 1024MB 667Mhz DDR2 Memory (2-512MB)
Hard Drive: 120GB 5400RPM SATA Hard Drive
Optical Drives: CDRW-DVD Combo Drive
Video: nVidia GeForce Go 7600 (128MB)
O/S: WinXP

 

make sure the video card drivers are up to date and also in nvidia control panel you can try adjusting overlay settings(which applies to movies games etc)