Windows 7: Slideshow screensaver looks terrible!

For some reason, all my photos in the slideshow screensaver appear horribly pixelated, like thumbnails being displayed at normal picture size. The date stamp below each photo is razor sharp, but the photos themselves are very grainy. Also, everything is in black and white -- is that normal? So far my searching on this issue has turned up nothing, so I was hoping perhaps someone here might have an answer.