I've seen this problem before. Yea, do as Blam says and update your graphics drivers.
You've already said on IRC that Soft Shadows were off, so I won't suggest that.
"Call yourself alive? I promise you you'll be deafened by dust falling on the furniture,
you'll feel your eyebrows turning to two gashes, and your shoulder blades will ache for want of wings."
Open chat with T and type /lws shadername.lws, where "shadername" is the filename of the shader you want. You can find the default shaders in Toribash/Data/Shaders.
Edit: Gah Pirate.
"Call yourself alive? I promise you you'll be deafened by dust falling on the furniture,
you'll feel your eyebrows turning to two gashes, and your shoulder blades will ache for want of wings."
[sigpic][/sigpic]
From a looong time ago:
[21:56]<Blam>ManBreakfast: Frunk wants to know why you banned him from IRC
[21:56]<ManBreakfast>oh, fuck
[21:56]=-=Mode #toribash -b Frunk!*Frankie'sip by ManBreakfast