Splotchy Video & Imagery (Color Depth problem?)

[parialex]

I got a new Thinkpad T510 in March with 1600x900 resolution. It's mostly my "work laptop", so I haven't really tested video capability until now. The video comes out extremely splotchy and is nearly unwatchable. It seems to be lacking color depth, though the settings are on 32-bit. Anything gradiant comes out as a series of lines. This is true for images, but particularly true for video. And a character wearing a blue shirt will have a shirt of splotches.

I tried upgrading the video card drivers. I looked at the Monitor Settings to assure that it was indeed set to 32-bit. Does anyone have an idea of what the problem might be?

It has the NVideo 3100M video card.
Running Windows 7, 64-bit Professional