It sounds like you have set up a Dual Monitor Display in Display Properties. The symptom is classic. The system thinks there are two monitors with the 2nd to the right of the first, so the Desktop and any window displayed on it can spill over onto the non-existent monitor.
Go back into Display properties, Settings tab, and see if you have two monitor images. Normally the 2nd is grayed out, but if yours is not, select it and remove the tick at the bottom for "Extend my Windows Desktop onto this monitor".
That should do it.
Im having trouble figuring out why my mouse pointer goes way beyond the right side of the screen. If I try to use the scroll bar while I'm in a window I notice that the pointer will go beyond the scroll bar into no-mans land and I will have to bring the pointer back an inch or two to the left to situate it back on the screen. I'm running WinXP SP3, on an IBM T23. This happens both with the keyboard mouse control and the Logitech optical mouse. This started happening when I was fooling around with the resolution settings on the display but after returning everything back to its original state, its still doing it.