I am pretty sure this is a problem with your monitor. I used to have an old monitor and I couldn't go above 800 x 600 resolution because the monitor was so old and couldn't handle it.

Yep, I agree. Games will retain their own resolution and graphics settings, no matter what your desktop settings are. You have ruled out hardware problems, since you are able to break out of a game and return to your desktop. You have ruled out resolution and refresh rate, leaving only the monitor as far as I can see.

It is not the monitor. As i said, I used my crt monitor and it did exactly the same thing that my lcd does. It will work just fine until i try to run a game.

Could be Video card or Power-supply also... When you run games --that is the most stress put on your hardware.

I am thinking that it must be my video card as it is progressively getting worse... ah well, i want a 7950 anyway. I know that the power supply is good.

Just out of curiosity-- how old/what brand is the PSU-- these things do wear out also.
Have you checked for fan failure/clogged ventilaton screens... heat could cause this too.