Strange texture overlays, skewed gfx, misaligned cursors

[Wrestlevania]

I bought Penumbra as part of the Humble Indie Bundle and I'm having some problems with the in-game graphics.

The game starts up fine, all the menus work and look correct, but in-game I'm seeing some strange effects happening. This is mainly that predominant world textures seem to be thinly overlaying the player's view point (this might be intentional though?), but also that the interaction cursors are only showing up about 2-3 inches below items/objects when I look at them.

I have an Nvidia 7800GS AGP(!) card, the latest drivers, and am playing at 1280×720 resolution. Every in-game graphics option is set to either "On" or "High" by default it seems, plus I've set Anisotropy and Anti-Aliasing both to ×4 manually.

Can anyone help?