Wow! I haven't seen this problem posted for a good two years!
IIRC the cause can be one of three things:
- a problem with the source image (ie incorrect masking)
- a problem with your video card rendering (ie old drivers, old card etc)
- a mess of mods installed that aren't compatible with each other
I'll rule the first out now, as I know for a fact that the source image is fine.
