Yeah, obviously you have no idea how useless and disorienting google is when it comes to solving graphics errors. NOT TO MENTION, that this forum is specified around kotor 2, so it only makes sense to post here, as obsidian, and others might, oh, I don't know, know about it?
To Krelm: Yeah, I have had that problem too, not often. Usually saving and reloading clears it up. There are a few other things that could cause it of course, in CCC, in 3d options, theres a tab called advanced options, try messing with those. Great thing is, if the game messes up, its external, so you can always change it back.
Updating could possibly be the answer, ati is pretty avid about updating their stuff. And that is a relatively new card you have. I myself use a HD2600xt, and have a graphics glitch when I use runspeed, and have found no fix, other than turning off frame buffer. Which sucks cause then when you go invis, it looks retarded. But, what can you do.
Last of all, you may want to use a driver cleaner on any previous gfx card drivers you've had. Use this, http://downloads.guru3d.com/download.php?det=745
Mind you, run it in SAFE MODE for the best results, it is VERY quick, and very easy.
oh and Bass, x1950 is only for Radeon, and, sapphire only makes radeon stuff.