For clarification... here is exactly what I did, and at the end, I'm still having overscan.
1) Open terminal window and type
sudo /etc/init.d/gdm stop
type in password.
2) in non-gui screen (whatever it's called)... I type in login/password
3) I type in
ps3-video-mode -v 131
4) I type in
fbset -a -xres 1236 -yres 692
5) I type in
startx
6) XFCE starts up, and it looks perfect.
7) I log out.
8) I type in
fbset -a -xres 1236 -yres 692 -vxres 1236 -vyres 692
9) I type in
sudo nano -w /etc/kboot.conf
type in password
10) I edit kboot.conf so ps3video line reads 131'
Hit ctrl-x. Save it with y. Hit enter to write to file.
11) I type in
sudo nano -w /etc/rc.local
type in password
12) I edit rc.local by adding in
fbset -a -xres 1236 -yres 692 -vxres 1236 -vyres 692
in the line just before exit 0 or whatever.
ctrl+x. hit y to save. enter to write to file.
13) I should be done. So I restart with ctrl+alt+delete
14) The login screen is all garbled.
15) I hit ctrl+alt+backspace to kill x server.
16) magically the login screen comes back. but already I can tell there is overscan.
17) I log in... and still have overscan.
Why?

Now, I could just login with the overscan. Stop gdm. Enter ps3 video mode. enter fbset settings. Start x. and I'd be in heaven.
but I'd have to do that every single time.
Please tell me I'm doing something wrong.

Thanks.