Hiya,

X-wing was running fine until I had an nVidia driver update today and now the game just stays in a very tiny square in the top left corner of the screen. The audio still works fine, but it just looks like the video display has been compressed into one section of the screen.

Anyone else encountered this or know how to fix it?

The NVIDIA drivers are apparently known to break the engine/game with new drivers, since some components get discarded that were necessary for the old renderer.
I submitted support tickets to Nvidia and GOG, having similar issues, and the only options are to revert back to an older driver or wait for an update that fixes the problem. Although the latter is unlikely.