It seems that the graphics device is loading the default the Windows graphics drivers. I recommend to completely remove the video drivers currently install on the system, you can remove them from the programs and features option in Control panel
Once you remove the drivers, please install these drivers:
Once you install the latest drivers check the system resolution again.
Under the device properties for the display adapter it lists that its running the latest Intel drivers: 220.127.116.116. I'l try the version you have below.
I tried installing the driver package, but it errors with: "the computer does not meet the minimum requirements, etc.". I'm running Windows 7 64bit Ultimate.
This error message shows up when you try to install our drivers and there is a additional PCI Express video card install on the desktop board.
Check if there are no other additional cards on the desktop board,remove them and then install our drivers
Do you need to remove the video card even if the BIOS is set to use the IGD video (vs. Auto or PEG)? Either way I removed the card and it still has the same error. Note I do not get this error if I install the pacakge from here: http://downloadcenter.intel.com/download.aspx?url=/18829/a08/GFX_Vista_Win7_64_18.104.22.168.2086_PV_Intel.exe&DwnldId=18829&lang=eng
Also I tried breifly to get HDMI to work instead of DVI. HDMI does not appear to work correctly even in the BIOS. I can't see the BIOS setup menu if I use HDMI. Occasionaly I'll get something that is way zoomed into the center of what should be the setup menu.