That looks like the mipmap detail is set too low. I don't have that on mine, either, and I *do* have an ATI card.
Make sure the Mipmap setting is "High Quality". I don't recall a "Geometry instancing" option, though - you are running ATI's stock CCC, right? Not the Omega drivers or anything? If so, you want to use the standard driver - Omega's are quite buggy in this manner. I suppose for 'popular' games they are fine, but they introduced BUCKETS of glitches like this in niche titles.
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