Layers transparency appears as black in Photoshop CS4 extended

My preferences are set up to display the layers transparency as grid size medium and grid colour light but when I use a layer the background is always solid black rather than the chequered design it is set up to be. I have tried altering the preferences, I have tried re-installing CS4 but nothing seems to make any difference. Has anyone experienced this before and can anyone suggest how I overcome the problem?

I only updated my driver for my graphics card last week and I think it was after this that the problem started. Will it make any difference to CS4 functions having the Use for Image Display box unticked?

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