Hello! Long time listener, first-time caller.

So I've had this issue with ambient occlusion since I started using it quite a while back.
It's hard to find examples because it's only annoyingly apparent when in motion.

http://i15.photobucket.com/albums/a358/AdrianBurks/ScreenShot8.jpg

http://i15.photobucket.com/albums/a358/AdrianBurks/ScreenShot6.jpg

It appears as though the AO is showing through objects it shouldn't be, making me see a shadowy outline of everything through them. It seems as if it's actually just showing me the ambient occlusion behind the object.
This will happen with trees, dungeon walls, wooden floors, etc. Also, and this aspect is relatively new, when I come within a certain range of anything, I can see the faint shadow (with color) of anything through my shield and sword, making them appear transparent.

http://i15.photobucket.com/albums/a358/AdrianBurks/ScreenShot10-1.jpg - Here you can see the area around the sword beginning to darken before I'm even close to the wall, as if it thinks the wall is much closer than it is, thus casting a shadow with AO.

http://i15.photobucket.com/albums/a358/AdrianBurks/Screenshot20136.png - And here is when I strafed closer to the wall, and my sword passes through it's own AO shadow and becomes completely darkened, at which point I can see textures behind it when I move around.

I use a GTX 680 and have tried different drivers as well as tweeked AO settings in the Nvidia Control Panel but neither had any effect on the problem.
Has anyone experienced this or know of any possible solutions?

Thank you for your time.

I haven't used AO with nvidia CP since 1.4 but have you tried using the inspector tweaks to get settings from another game, such as GTA4 or BF3?

Yeah, I've tried several different setting in that regard. I just now noticed that when I see through an object, like a tree, I can't see the outline of other trees. it's as if the trees are being ignored completely, like they aren't there. Also, upon further inspection, I noticed that I'm definitely seeing textures through my shield and sword as well, but only when I come into close proximity of something.

Btw, Mugen is my hero.