T42 screen expansion problem and fix that worked

[tbThink]

System Config: 14" T42 SXGA+ 1400x1050. Windows 7 Pro.

Problem: Pressing Fn+Space to reduce resolution (to 800x600) but keep physical size to match screen did not work, instead I got reduced resolution window with a large black border.

In the BIOS I had HV expansion on but in addition, the following settings made a difference.

The change that fixed the problem was going back into the BIOS (F1) then (CONFIG -> DISPLAY) and changing the display settings to

Default Primary Video Device: PCI (this was the key setting)
Boot Display Device: ThinkPad LCD or Analog (VGA) worked here.