TriggerFinger

Yep it sure looks like a video chip problem. But before we jump into that conclusion, try uninstalling the video drivers (see Device Manager). Also uninstall any or all video driver related program in ADD/REMOVE. Reboot. This should give you the basic screen resolution, not good to look at but may give you some clue. Install or update chipset drivers if there's any (see HP website for your model) then install the video drivers.

Also try booting with another operating system from a live CD (i.e. Knoppix or Ubuntu or similar). Observe if the symptoms are the same.