when I first tried 1280x800 (widescreen) last year, i got the backwards blackout (center to edge). I think it just took a restart to fix.. but as I realized the resolution cut off so much vertical FOV, I went back to 1024x768.
when I went back to 1280x800 today, I've had no problems at all... You wouldnt happen to be running a nvidia 8400gs would you?