CUDA driver version is insufficient for CUDA runtime version

While executing any of my programs after compiling them with the new CUDA 3.1 I get the following error

Runtime API error : CUDA driver version is insufficient for CUDA runtime version.

This is on a 32-bit platform, using the 256.35 driver and a Quadro FX 5800 card(Compute capability 1.3). A quick search on the forum revealed that some people were having this problem in 3.0 but they had reported it solved in 3.1. However for me its going the other way around. Is this a known error or my computer is just going nuts?

I’m also having this problem on Windows 7 64-bit, CUDA 3.1 and equally new SDK and development driver, VS 2008 Pro, GT 220 card, when running the newly built template project, unmodified except for being renamed to Gondor.