you said that your monitor refresh rate would change automatically to 60 Hz. Although I've never heard of such a thing, if it is the case, then the low refresh rate and VSYNC being disable will definitely cause wavy lines. Either lock your refresh rate at somewhere around 85 or enable VSYNC.
Did you check if TRUEFORM was on. If it is, turn it off. This was a software optimization and with newer games everything is done via software. Except for a few programs such as Morrowind, this function is not supported.
My gaming machine:
P4 2.8 GHz
2 X 512 MHz PC3200 in dual DDR mode
Intel D865PERL MOBO
integrated 6.1 MAX audio
Logitech duo MX mouse and KB
ATI RADEON 9800 PRO