What resolution do you have your textures set at?
Yep, you've hit on it I think, USRanger.
MADe, when your game opens in windowed mode, click on the "Video Settings" option on the clipboard. A dialog window will open, and there is a drop-down field for texture resolution. Choose either 1024 or 2048. However, you will need to download and install the Hi-Rez Texture Pack from the Downloads page on the HTC main website first. BTW, there is also an anti-aliasing slider on that dialog pane that allows you do get rid of the jaggies.
So recapping: download/install the hi-rez texture back. Enable "application controlled" anti-aliasing in your graphics card's control software. Enable 1024 or higher resolution in the AH Video Settings page, as well as higher anti-aliasing. You should see a marked improvement in your view of all textures at that point.
FWIW,
