Major graphical problem, tried everything I can find on forum.

[Xeropace]

I'm running:
Vista home premium
Intel core duo 2.4ghz
ATI Radeon Mobility HD 2600
3gb ram

Textures are missing or stretched, lights look like huge boxes. Effects are shrunken and applied 100 times in a small cube. Lighting doesn't work correctly and all sorts of other problems.
I've tried the hot fix topic and I followed every step to the letter. I've tried the community suggestions too, like disable aero. The best i can get it is to run in 640x400 with aero disabled and using the original exe. It starts fine but by the time I'm in the water cave it becomes awful again. Lighting breaks, textures go black, torch and glow stick look awful and don't actually light anything up. Changing shaders down just makes it worse so it has to be high. Turning off post effects does nothing. I'm on the newsest drivers too.

I'm pretty good with computers but this has me stumped. I know this game has issues with ati and I know mobility cards are awful too so that doesn't help =P