Can you pls put up the specs for you computer. What brand Video Card is installed? I know Ati cards require a control panel install, this may have corrupted the display settings.

Have you tried accessing the dialog box via the control panel instead of right clicking the desktop?

Also, let me understand, you did a reformat then clean install of XP, then how did you restore a backup of your HD? what was in the backup, only documents or full install programs?