This is the same issue I am having atm, and had back in 2007, when last I played. I have been going thtough a long list of things to try, with several TSR's, but so far nothing has helped.

My invnetory looks like Varrahs when I equip a variety of different tops and blouses. some work, but most cause the color square invnetory and either remove all textures from my surroundings or just lower the level of detail something insane. If anyone has found a solution to this issue, please let me know. It's driving me nuts :p

and yes, I am running vista 64 bit ultimate edition, core 2 duo 2.66 GHz processor and 7 gigs of RAM, and an Nvidia 8800gts Graphic Card.

If anyone out there is still experiencing the same issues I am  (and I am sure you are) I have written a detailed report based on my own experiences with the issue and as much trial and error as I have gone through to fix it. All my "data" has been compiled and it has been sent to the MXO Development team with assurances from a TSR that it has been sent.

Here's hoping that it will actually result in something and soon I know this is an issue that has existed since 2007 at least (I know, because I sent reports on it back then as well, just not as vigilant to solve the issue as now.) but I really want this game to work on my rig.