Some suggestions come to mind.
- Try reinstalling SH3. To be honest, when you upgrade hardware it is strongly recommended to do a clean install of windows, too. It could be that the SH3 game has older graphics settings saved for the older video card. That happens sometimes with some games. Or it might be a faulty driver that didn't get removed with the new ones.
- It could be an infected/damaged sh3.exe or some other important file. Do an online virus scan. If you google for it, Norton has a free online virus scanner/remover. :P
- See if the GWX 2.0 icon has compatibility mode for win2k. Change it back or change it to win2k. No harm in trying.
- Lastly, see how the game's FPS are when out at sea far away from a harbor. If distance to a habor makes a difference then increasing the task priority for sh3.exe in the task manager might help. Alt+tab out of the game and increase it to "high priority".
- Do you have Episode 2 and SH3 installed in the same hard disk?
- It might even be a StarFarce related problem. Damaged DVD perhaps? Hint: StarForce can be uh.. *cough* removed *cough*....
But seriously, that is one really weird problem and I wish I had more proper advice but I don't, and unless you're very lucky it'll take some effort on your part to troubleshoot it.
Good luck.