I've opened this thread in the 'Displays' section also :

We have a 3003LC model Acer Aspire, and it won't do Extended desktop display without locking up and CPU hitting 100%.
Can any other owners of this laptop please try doing this and see if they get the same result ?
Plug a monitor in to the laptop's VGA port - go to display properties, choose settings, click the number 2 box in the tab's window, then click 'Extend my windows desktop'.
See whether you get constant lockups/freezes too.

Alternatively, if you have owned one and/or know of this problem, please point me in the direction of a fix or some advice.

Acer cust support just told me to reinstall from their support CDs ! I've already reformatted to fresh XP install with all new drivers/updates so that can be eliminated. I've also upped the onboard gfx memory to 128MB and that doesn't help either.

I need to know whether this is a fault on the laptop, or whether the gfx just ain't up to it or whatever.

Any help much appreciated.