Your graphic drivers are written for an older version of windows
I installed windows xp maybe thousands of times and yet this is a new one. A client of mine has custom install cd’s that are Windows XP SP3 and include NVidia Graphics Drivers. All good and nice but they wanted to have the latest NVidia Graphic Drivers so I went on and downloaded the latest drivers and installed them. After reboot Windows greeted me with an ugly face in 640x480x16 colors. Going to the Display Properties cleared the problem a bit. The error said something like “Your Graphic Drivers are made for an older version of Windows”.
Gee, you don’t say. I tried uninstalling and installing again but to no effect. What did work surprised me. The solution is to install the driver TWICE.
Yes, dear windows user, twice. I don’t have an explanation and it works. Confirmed by the fact that I stumbled a few days ago on the same problem on a computer running Windows XP, SP3 with an ATI 4650 graphics card for which the owner installed the graphic drivers that came on the manufacturer’s CD. Again, updating those required to install the new drivers twice.