Hi BM! I installed an earlier version to check if the aliasing on icons disappears; it looked ok but after a restart the problem is back; that darn aliasing is left even in the Win XP itself (after the latest update)  - certain small icons are  jagged (they are smooth on my old machine) :-(
I doubt that Bill G himself could solve this tiny but irritating problem... (Icons looks good  in other apps and browsers though; thanks for that) - going to check IE 7 ; thanks for the info!