I have a PNY 9600GT and a Gigabyte GA-X48T-DQ6 motherboard (intel x48 chipset).
Windows XP SP3 clean install, latest chipset drivers
When I first installed the card and fired up the machine, XP's display was ok (edit to add: no driver yet installed). I installed the latest drivers, rebooted, and now when XP loads the display is completely garbled. If I use the VGA connection instead of DVI, it looks fine. It seems to be only DVI that is screwed up.
Any ideas? I returned the card thinking it was defective, but the replacement has the same issue. I have tried a totally different PCIe video card (Matrox P650) and it works just fine.
At this point I don't know if it's a PNY problem or a Gigabyte problem.
Try reinstalling the drivers from Nvidia's website again maybe? Try it with an older driver too just to see if there's a difference. You could also try without SP3, just SP2, and see if that makes a difference. Obviously, from your description, it seems software related as DVI was fine until you installed the latest drivers. I don't know if it's possible to even do it, but are you sure you got the XP 32 bit drivers and not some other?
You really shouldn't have to resort to earlier drivers. You said that your second card does it too. Well the second card I'm sure came from the same place as I would figure you'd just exchange it. If there was something phsyically wrong with that card, then it may be a problem with all the cards from that same batch. It's very well possible that your replacement card was part of the same batch, therefore, having the same problem.
If your Matrox P650 card works fine with it's drivers on high resolutions, then I'd say you can count your board out of the problem. You could also see if it's just higher resolutions that distort and corrupt. Lower the resolution and see if it's corrupted. You can try older drivers, but even if that works, you shouldn't have to settle for older drivers. If you make sure it's not the DVI cable, I'd take this replacement back too and get a different brand.
For what it's worth, I replaced the PNY 9600GT with an XFX 9600GT and no longer have the problem. I have not yet tested the PNY on a different MB to determine if it was just a weird MB compatibility issue or a problem with both PNY cards I got.
I would imagine its the card. PNY isnt known for their stellar track record. One the reasons I only buy my hardware from manufacturers like Gigabyte, ASUS, EVGA, PP&C, Corsair, blah blah blah, is to avoid crap like this. Even if it costs me a $100 more on a build, its worth it for me.