I'm pretty sure the washout issue is completely separate. My friend has the 16.1" screen and has been complaining that the screen has very little contrast in comparison to her destop CRT. She's described it as someone turning the brightness controll to full-ON and the contrast control to full-OFF. The colors aren't rich or robust. She hasn't described the problem you're seeing with the text.
I'm stumped that going to the native resolution didn't fix that problem for you. I'd get on the phone with an Alienware support rep and email him/her those pictures while you're on the phone so they can see exactly what you're talking about.
If I come across any other potential solution, I will post it here. If you manage to find a fix, please post here too so we all know.
Now I think I'll go have a beer with jamaster14!