That does sound strange. You might open up the IE options, go to Advanced and choose restore defaults. Visit WindowsUpdate and make sure you have all the latest patches and updates for IE. Update your video card drivers to the latest version, and DirectX (if it isn’t the latest).
I checked MS Support, but it sounds like you’ve already tried what they suggested (although the first article has a patch available for download:
JPEG images appear distorted in Internet Explorer 6
Windows XP and Windows 2000 do not natively support high-DPI screens
If all else fails, I recommend switching to Firefox . It’s a better browser anyway.

