I also picked up a Dell XPS M1330 recently, from the Dell Outlet Store, and got a super deal: 4GB RAM, 250GB drive, 3.2 pounds, and four hours of battery life, all for under $700. Very nice. Except... I had exactly the same problem you described: when I had the laptop plugged in, the screen looked wonderful, nice and bright. When it was running on battery power, however, it was significantly less bright, so much dimmer, in fact, that I was tempted to send it back to Dell as a defective unit.
Instead, I went onto the Dell support forums and did a bunch of searching, finally finding out that there's a core laptop device setting in the "BIOS" that also affects the brightness of the screen when you're running off battery (versus plugged in). Why it's in the BIOS I don't really understand as that's not an area where you want regular non-geeky customers messing around, but with my unit, at least, I really can't imagine anyone who would get this laptop and not promptly want to adjust this setting.
One of those Windows/PC weirdnesses, I guess. :-)
Anyway, before you go and fiddle with the BIOS, there are two places you can adjust the brightness, both of which you should check. The first is the regular brightness control, which you can access by pressing Fn-Up Arrow and Fn-Down Arrow. Max that out, which should look like this:
In addition, go to Control Panel and choose "Adjust commonly used mobility settings":
Once you click on that, you'll see a bunch of options:
In addition to the Brightness setting on the top left (which is identical to the up and down arrow brightness control) there's also a "Display Settings" option on the bottom of this window. Click on "Configure" and you'll now see the Dell QuickSet custom display options. Choose "Display" --> "Brightness Options" and you'll see this:
You can try disabling the entire Intel DPST feature, but if you want to keep it enabled, at least slide the control so that you're indicating you prefer a better quality display even at the price of slightly shorter battery life.
Now, you've made all those adjustments. Did it work? If not, time to jump into the BIOS.
Take a deep breath.
Now, reboot your system and when it's just starting up, press F2. You'll move into the BIOS configuration area, which is primitive and basically all text.
Use the down arrow to find "Video" and press "Enter" to show the options there. You'll see two: "Brightness" and "Brightness (AC)". The first is what you want, and when I first looked at mine, here's what I saw:
I pressed Enter once again, then used the right arrow to adjust the indicator from "3" to "8" (max brightness). Now it looked like this:
Looks good. I press Enter to accept it, and then choose "Save & Exit".
Now your display should be just as bright when you're running off battery as it is when you're plugged into the wall. Finally!
My tip? Use the brightness controls to step down one value on brightness.
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I have a XPS M1330 and the screen brightness on battery seems to be not complainable. In fact, when I press the Fn + Up Arrow keys to max out the brightness setting it gets closer to the brightness as when wired.
I believe, if at all, the setting is to conserve on battery power so when you switch to battery it gets dimmer. If you really don't care about the battery charge longevity then I think setting this in BIOS makes sense. I would just leave it at the default setting.