Open Catalyst set Catalyst AI is set to "High Quality" and uncheck "Enable Surface Format Optimization", close down Catalyst Control Center, go into task manager end MOM.exe/CCC.exe
Go to C:\Users\
Open up Profiles.xml with Notepad or whatever
Save close make sure it's read only. (Impotent)
Goto this destination and run the file
C:\Program Files (x86)\ATI Technologies\ATI.ACE\Core-Static\MOM.exe
Reboot! NOW DONT TOUCH CATALYST CONTROL CENTER OR ANYTHING WTIH ATI THEN IT MESSES UP.
But by doing this you will have alot of texture artifacts, such as wrong texture at wrong places, in my example it showed the mega texture in small bits and black bits for other textures. But overall the LOD is 100% working and texture loading, but only on the texture that ain't messed up.
This is confirmed with 10.5, 11,5, 11.8 and 11.9 beta and 11.9 Rage ATi Driver fix
Seems like John D. Carmack II did not get this game right like it should give him a few moments to get his team together to patch this OpenGL bug, also dont stress ID Software or Bethesda like you do, Ati and Nvidia has are big tile failures in delivering proper drivers in time before release.