The flashing is something I've had on every PC and every version of SH3&4 I have played. I think it's coded into the game and related to the chaning of the lighting effects as the time of day changes. I also think the water changes do this. It looks to me as if the water depths/textures/colors load in grids and each time you pass a grid boundary the water is redrawn.
I have a pretty high end card and have seen this with several cards of different capability and different computer hardware over the course of severals years.
I don't think it's possible to get rid of it. I would never for a moment let it keep me from enjoying the game though. I don't even notice it most of the time likely because of my playing style.
-Pv-
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