I found the following in an article titled 'GPU and OpenGL Features and Limitations in Photoshop CS4' at http://kb2.adobe.com...ps/404/kb404898.html:
Display card: ATI Radeon HD 2600 XT
Issue: Images display in chunks and with lines.
Solution: Turn off Enable OpenGL Drawing.
So looks like this is a known issue and the only workaround is to disable OpenGL.
-sri
Just like i thought. This is a lot like when Doom3 came out. ATI clocks their cards quite aggressively, so in turn when new applications come out sometimes they suffer from artifacting.
I would still recommend clocking your GPU and memory down by about 5mhz. You wont notice a difference in performance [usually], but it will let you re-enable the opengl functionality of photoshop.
Also, loosely speaking, it is caused by heat (unless for some reason there is an incompatibility, which I doubt), so you could get the same results from improving the cooling to your card. If your card is on the verge of artifacts, it may affect its lifespan, so even though disabling the feature helps photoshop, it would be wise to fix the root of the problem still.
Finally, it is highly unlikely to be caused by the opengl version, since this is a common problem associated with clock speeds and/or too much heat.