I am having the exact same texture issue Artreus, came to this forum hoping for a solution. This problem is unacceptable.

I have a 4870x2, Likely to be an ATI driver issue?

Nope. I have HD 6870x2. Looks a lot better here. Just running everything on high, triple buffering and Oblivion crossfire profile forced through Radeon Pro, VSync disabled.

Exact same problem here as well artreus that looks identical to my issue and i have a 6950 2gb graphics card..sure seems like it is a amd driver issue now.

can i suggest one thing?
have any of your tried on a new user account?
create a brand new user on your system and then test the game. this should re-write and entirely new prefs file into the user directory.
that should eliminate anything like odd video card settings you have forgotten; corruption in the prefs file, and also restore everything to default values. The fact you cant change texture settings seems odd.
so by using a new user account and testing we can at least eliminate your prefs file, video card settings and anything else depending on accessing your windows profile areas.
dont change anything when you run skyrim; keep at its default values for the first run. then exit. then try running again and changing settings.

if its still doesnt behave then we can look deeper.
its a 10 minute test.

An AMD driver issue, but not with every AMD card. Fun problem.

I am sure they have a ton of issues to work on right now, as this was a huge release. I do not think they will be announcing any big fixes tonight. I will keep checking here, but I think the only real solution is to go to bed and hope they have it fixed sometime this weekend.

Reports of problems with the game are welcome. Being incredibly rude about it and flaming each other is not.