No change. Without fences enabled, I have a 1400 x 900 main display and an attached 1280 x 1024 additional monitor - Monitor 1 and Monitor 2; respectively.
When I enable fences, Monitor 2 converts to a size and wallpaper clone of monitor 1 with no icons visibile on monitor 2. Monitor 2 displays a black bar at the bottom of the screen; if I were to place a bet I'd put money that the black bar is exactly 124 pixels (1024 - 900) high. The black space is, however, active - I can move the mouse through it, place shortcuts there, etc.
Guessing the issue has something to do with the way Fences takes screenshots...
Disabling fences returns the proper resolution and wallpaper to monitor 2.
Running XP sp3 on a Radeon 3400, monitor 2 as an extension of monitor 1.