This one is hard to explain so I am going to include some screen shots. AutoCAD Mechanical 2011 looks fine but AutoCAD Mechanical 2012 doesn't and has some missing User Interface elements.
AutoCAD Mechanical 2011
AutoCAD Mechanical 2012
NOTE: When you try to resize AutoCAD, the "A" menu also lags on the desktop. The resolution of the laptop was set at 1900 x 1200.
The basic troubleshooting steps that we tried included the following:
1. We reset AutoCAD by deleting registry keys and files as noted in this solution:
NOTE: We had to extrapolate the registry keys for 2012.
2. We updated and used the default settings in the Adaptive Degradation and Performance Tuning Dialog Box.
3. We also used a saved Default profile (.arg) on a vanilla install of AutoCAD.
In the end, there were 2 solutions:
1. We used a Windows 7 theme that didn't use Windows Aero.
2. If you revert back to a Windows Aero theme, we changed the Text size to 100% or 125%. In this case, the problem was caused because it was set at 150%.
Thanks to Jonathan Schmid for confirming that this solution worked.