Text Size set on Larger (150%)
Set on Medium 125%
Which is it? These are two different settings on that same "text size" screen. Which one do you have set?
Also, you didn't answer my question regarding the ATI video drivers installed. See my screenshot above. What version of driver is installed for your ATI HD 4200 (Device Manager, right-click on the expanded display adapter line, select Properties, and then Driver tab... what does it show?)
Personally, in my opinion since you have an LCD screen and not a CRT screen, there would be no relevant "horizontal/vertical size/location" adjustments for you to play with, to better "center" your Win7 desktop so as not to chop off the bottom of the taskbar from view.
I suspect this is a video driver problem. Is 1600x900 the "recommended" resolution for your monitor?
I have experimented on my own system, which has a "double-high" taskbar. Normally I use "small icons" on the taskbar, because I have lots of them there. I use it like the Win7-equivalent of the "Quick Launch" section of the WinXP taskbar.
It looks like this, normally:
with "use small icons" checked in the taskbar Properties setup:
Note that if I un-check the "use small icons" option, everything gets resized properly to enlarge the taskbar icons, including Windows raising the height of the "double-high" taskbar to accommodate two complete rows of icons.
However since the icon size is now larger, even two rows of icons is insufficient, and an up/down scroller is added on the right side of the taskbar to allow me to get to the third row which is now present. Actually, I should have made the taskbar "triple-high" if I wanted to use these larger icons (which I don't). Obviously, the "use small icons" approach is superior.
and the Properties:
But note that in both cases, the entire icon is visible in each of the two rows presented.
What does yours look like? Can you take a screenshot like I've done and post it here?