I just had a very similar problem on my new system, and GOT IT FIXED after trying several things!

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My problem was the same you describe: Everything was fine, until i installed the video driver. On the first reboot after installing the driver Windows loads normally until right before the welcome screen. The display goes black and display LED blinks. I can tell Windows still continues to load because i can hear the startup sound from my speakers and the harddisk activity looks normal too. The system will even shutdown properly with a single push on the power switch. So no crashes or anything, just no display output. Booting to safe mode is fine. In safe mode you can remove the Nvidia driver in Device Manager so you can boot back to normal mode again.
After googling i tried various things:
- First went on installing all the other drivers and updated the BIOS, since it was a brand new system on a fresh install. This may be a useful tip for people with the same kind of problem: Always check your motherboard's site for the latest BIOS version.
- Tried the latest driver from Nvidia's site (the first time was the driver offered trough Microsoft Update). Nvidia's own driver got me past the welcome screen, but a few seconds after the welcome screen the display went black again. I guess Nvidia's own driver applies the new settings a little later than the one offered by Microsoft's Update. A slight improvement, but no fix.
- Switching off Write Combining is suggested in farious forum topics, but i couldn't find this option. And i'm afraid i i change this option it will just be reset once i install the driver. No fix there.
- Tried another cable. Both cables were DVI, but i read somewhere a guy fixed this by buying a new DVI cable and i had a second one laying around. Would have tried a analogue VGA cable too, but couldn't find one. Cable doesn't seem the problem either(for me).
At this point i was about to try the videocard from my old system to see if it had the same problem, but went to my BIOS settings first. After looking around in the BIOS settings i changed two settings:
- Plug And Play O/S (Advanced > PCI/PnP Settings): Changed from Yes to No.
- Initiate Graphic Adapter (Advanced > Chipset Settings > North Bridge Chipset Configuration): Changed from PEG/PCI to PCI/PEG.
Saved changes, reboot, installed drivers again, reboot, and... IT WORKED! So changing one (or both) of those settings above did the job. I don't feel like figuring out which of the those two settings was really responsible for the trouble right now (already spent way to much time on this), but i post this for people with the same problem googling for an answer.
Relevant system specs:
Asus P5Q Deluxe motherboard
NVIDIA GeForce 9600 GT GPU
Windows Vista Ultimate SP1 64-bit
Hope this will be helful to someone...