I sort of had this issue with my GF3 and WinXP. But you said that you're able to simply set it back to 32bit color, and I couldn't do that. In fact, if I tried to increase the color settings, I had only 256 available, and the resolution got bumped much lower when I'd select the higher color setting. This just started out of the blue too, no driver changes or anything at the time.
In fact, my WinXP gave me a nice '!
' under Device Manager for the video card, telling me it had been unable to initialize the device (Code 10.). Fortunately this started occuring right about the same time as I was ready to make my yearly upgrade, so I ended up with both a new motherboard and a new video card. I had thought my GF3 video card was to blame (the driver version didn't seem to make a difference- trust me, I tried a bunch), but I tested the system using the new GF4 and had the same issue. I later found that it is my Asus A7M266. For some strange reason, AGP4x mode no longer works properly on that motherboard.
When I set it to use 2x mode, everything is fine, but if I force 4x or set it to auto in the bios the issue starts up again.
(My wife's using that motherboard AND that video card now, but only under 2x mode, which btw doesn't seem to have made much difference to overall performance- it was / is just annoying knowing that a feature that's is supposed to be [and was] working doesn't any longer)