iMac screen/desktop/wallpaper resizes automatically between blue screen

For two weeks my screen will go blue and then any data on the screen will come back, either to normal or expanded in scale. In the desktop preferences it will offer desktop and VGA options. Over the last two days it will resize smaller with black edges and display the last wallpaper I used not the current one.

Any help in correcting this would be great it's an iMac and runs Mac OSX Version 10.4.11

Thank you.

Thank you, I read about Stuffit AVR and I can't find the 'Other preference pane' - is it in system preferences? Also, I took the computer to a Genius Bar and they said they couldn't reset the PRAM, so maybe it is hardware...

I have removed most things from start up items and I've booted to the install disc and it took me offline and put up the login screen, other than that the same problem did occur I believe.

It just suggests to me with the VGA panel simultaneous to the iMac desktop settings and the variation in wallpaper that it's software related and indeed needs resetting... I think the computer thinks there are two separate screens in parallel operation and I don't know how to tell it there's only one! Thank you for you suggestions. Please add any others.

I have just reset the PRAM, thanks for your guidance, it strikes me the guy at the Genius Bar didn't do it properly. So far it seems to have fixed the problem. Thanks again.