Graphical issues in TR2 for XP

Last weekend, I downloaded the demo for Tomb Raider 3's expansion pack, The Lost Artifact. I immediately noticed that the horizon's textures were acting strange. Although this particular shot is from TRII, it looked exactly like this:

Obviously since I took the above from TRII, it's happening in that game, too.

I've tried running both in lower compatibility settings, but that didn't seem to help at all. What's really odd is that I've played TRII all the way through once before and never encountered this issue, especially not on the first level. I've also heard that you can make the older games do this if you hold 'Esc' while the level is booting up, but I've done no such thing.

Is there any sort of patch that could fix this problem? I'm tried uninstalling/reinstalling TLA, but that didn't seem to help. I could try the same for TRII, but I really don't want to back up my saves....

Note: It's been a while since I've played TRII, and have since had another, more advanced graphics card installed. Could that be the source of the problem?