New W7 user experiencing resolution problems

Howdy y'all! My first post here. I wondered if anybody could help me out - today I finally dragged myself kicking and screaming into the 21st century by having Windows 7 installed (yes, another longtime stubborn XP user!) and I have to say it's a thing of beauty. Everything is running swimmingly except one thing - my screen resolution. My monitor is a 20" widescreen AOC N20W and the widescreen aspect worked great when running on XP. Now that it's on W7 my screen seems scrunched horizontally with 2 inch vertical black bars on either side of the screen when gaming (online golf) or just a very centralised screen when browsing normally with blank vertical edges.
Now, I wouldn't come and bug you fine geniuses without scouring the internet first - I have to admit I'm not very tech. I can't seem to find an answer for this. My graphics card is a GeForce 8600 GT and I've just updated the drivers for both the monitor and the graphics card with no change. My native resolution is 1680 x 1050 and doesn't go any higher. I've tried all the other resolutions but no change. I'm reading things about overscan/underscan and chipsets and aaaaarrrrggghhh! I totally suck at computers haha!
Has anybody else encountered this problem and come up with a remedy?

Any help in laymans' terms would be most awesome. Be excellent to each other x

Howdy Paul and thanks for the welcome :)

Yes the monitor does have an auto-fit thingy - but it just does its' shaky/wobbly/fitty thing (very tech, I know hehe) and just resumes its' size.
This is a really nice resolution as it is - it's very sharp and clear. It's just 'squished' inwards horizontally and if pages don't have the black bars then the sides are of the same colour scheme of the page, just redundant.
I've really tried looking into this and only got as far as the nvidia control panel and tried changing the scaling and fullscreen aspects with no joy.

I would try, but my CC varies slightly. Whereas you have tabs for scaling and size, I only have tabs for scaling and position - and I've played around with both. Damn I want your control centre haha! One thing I have noticed - I don't know if this has any relevance - but my refresh rate is fixed at 60HZ in both the Nvidia CC and the Windows 7 display properties. There's a dropdown box but it still only shows 60HZ. I wanted to try at 75HZ but can't find the option to...

Oh and the screen resolution is set to 1680 x 1050 in Windows - the same as Nvidia. Next to the resolution is (recommended). All the other resolutions are all blurry. There is no higher resolution than the recommended one available.

Somebody else installed it for me. I've approached them about this and they have no idea.

I don't know how to do a screenshot but here are some specs if they help

System Manufacturer Foxconn
System Model C51XEM2AA
System Type X64 based PC
Processor AMD Athlon 64 X2 Dual Core Processor 5200+, 2611MHZ,
2 core(s), 2 logical processor(s)
BIOS Version/Date Phoenix Technologies, Ltd 6.0 PG, 24/05/2006
SMBIOS Version 2.2
Hardware abstract layer Version = 6.1.7600.16385
Installed Physical Memory 4GB