EDIT: Go back into DirectX Diagnostic and click the "video" tab at the top, and take another screenshot. That will give me more information.
EDIT2: Your laptop is page filing an unusual amount of information. Some suggest switching it off if your a gamer and have adequate memory (Over 1.0GB) in your case its 2.0GB so try switching it off.
On-Board card's the problem, then there's really no point bothering, aye?
Err... There is no video tab, and the "Display" tab is already included.
Turned off page filing, no real improvement.
Task manager stuff... Lesee... Reboot time, I guess.
Or better yet go buy an 4 year old desktop for like 100 dollars with a marginal but dedicated Video Card (FX5900 or better). Then load XP and live the good life.:)