I have may taskbar vertical as well. It's in fact much more convenient - you can see instantly which tab is which program - when you've got 10+ IE windows open that can make a lot of difference.. & when you're running a high enough res (1280x1024 on the primary) it makes very little difference to your desktop area... I can imagine though that it would be quite cumbersome at 800x600...
In fact a lot of the time I move the taskbar over onto the secondary monitor.. works even better from there..

still vertical of course though..
Heheh *doh* forgot the actual topic..
My desktop shows up with issues
similar to that if I crank the video card up too high... not all dissolving or anything but sort of fuzzy.. maybe have a look at your video card drivers??