I need to pose a thought for you: was this laptop previously used with a higher-resolution external monitor? Could be causing the problem somehow, but someone who knows something (not 'more', just 'something'!

)about such a setup would have to help you further here.
FWIW, I always set Linux up to start in runlevel 3 (text login) instead of rl 5 (graphical login), and set lilo or grub to text also. This was mentioned by henchard in the long message above; about paragraph 10 counting by blank lines.
Once I am logged in that way, I have Ctrl-Alt F1~~F6 text consoles (but each needs its own login, as root or any other user).
To start your usual graphical desktop, simply type
startx
& press enter, & there you go.
Two advantages to this all-text startup:
1) even if the graphics get mesed up, you can still log in with the consoles & multi-user availability, and
2) I have found that the text-text then startx has less problems anyway, for RH9, Mdk 8.1 & 9.2, and SuSe 7.3 & 9.0, on a variety of cpu/vcard/&c computers.
Best Luck To All !