Are your Video Drivers Installed Correctly? Start>Control Panel>System then hit the hardware tab and then device manager. Do you have any yellow '?' icons?
That may not show the issue, it can detect the device in Device Manager as a "Generic VGA" with no issues but not have the right color quality. The thing I find odd is that it allows you to select 32 bit even, but then resets it. If you have a driver issue, the base drivers won't allow you to select 32bit at all.
When/how did this happen?