First of all, check this out: http://www.gamesas.com/index.php?/topic/1313822-john-carmack-twitter-speaking-of-ati-drivers/
Particular attention to:
ATI is running out of memory in the 32 bit drivers and failing ungracefully. Don't use "large texture cache" or multisample.
If you're on a 32-bit OS then that's a likely cause of the problem.
Even if you're not on 32-bit your problem could still be something related. See the following extract from the first patch release notes:
If after changing the Texture Cache to LARGE you experience a crash or texture corruption (like a partially or completely blue world) then the graphics driver may have run out of memory.