How are you determining this?
If you are using the tool in windows that tells you whether or not it is updated, it's never accurate. It will tell you that it is updated, when it isn't.
Go to start > run > dxdiag
And post the entire contents of the first tab, and the display tab. I'll help you update them manually.
Sorry for major bump but I already updated my graphics chip on Intel website plus Intel Craphics (What I call them) Card is something that you should never mess with. If something screw up, PC lits on fire and you would have to kiss your house good bye and welcome yourself into the hobo world.
But I'll shall give you them anyways:
Time of this report: 9/1/2011, 15:07:06
Machine name: (Blocked)
Operating System: Windows Vista™ Home Premium (6.0, Build 6002) Service Pack 2 (6002.vistasp2_gdr.110617-0336)
Language: English (Regional Setting: English)
System Manufacturer: Gateway
System Model: W3653
BIOS: Phoenix - AwardBIOS v6.00PG
Processor: Intel(R) Celeron(R) CPU E1200 @ 1.60GHz (2 CPUs), ~1.6GHz
Memory: 1014MB RAM
Page File: 819MB used, 1474MB available
Windows Dir: C:\Windows
DirectX Version: DirectX 11
DX Setup Parameters: Not found
DxDiag Version: 7.00.6002.18107 32bit Unicode