I've installed Windows XP SP2 on a computer (there was not SP at all). Now the display settings are set back to 640x480 and 4 bits colors. And I can't change it, it's the only option in Settings tab of the Display dialog of Windows.

The screen look awful now, how can I solve this problem?

UPDATE: Seems to be a problem with the video driver (thanks @Karan and @Hennes). I did run Speccy (PC-Wizard freezes the computer) and this is a part of the log file:

Summary
    Operating System
        Microsoft Windows XP Professional 32-bit SP3
    CPU
        Intel Celeron
        Willamette 0.18um Technology
    RAM
        512 MB DDR @ 133MHz (2.5-3-3-6)
    Motherboard
        COMPAQ 0838h (FC-478)
    Graphics
        Standard Monitor (640x480@1Hz)
    Hard Drives
        19.0GB Maxtor 2B020H1 (PATA)
    Optical Drives
        No optical disk drives detected
    Audio
        No audio card detected

...

Graphics
    Monitor
        Name    Standard Monitor on
        Current Resolution  640x480 pixels
        Work Resolution 640x450 pixels
        State   enabled, primary
        Monitor Width   640
        Monitor Height  480
        Monitor BPP 4 bits per pixel
        Monitor Frequency   1 Hz
        Device  \\.\DISPLAY1
    OpenGL
        Version 1.1.0
        Vendor  Microsoft Corporation
        Renderer    GDI Generic
        GLU Version 1.2.2.0 Microsoft Corporation
            Values
                GL_MAX_LIGHTS   8
                GL_MAX_TEXTURE_SIZE 1024
                GL_MAX_TEXTURE_STACK_DEPTH  10
            GL Extensions
                GL_WIN_swap_hint
                GL_EXT_bgra
                GL_EXT_paletted_texture
                GL_EXT_bgra