I got that problem back when I used a ATI 9800 pro overclocked. looks like a overheating problem. If your overclocking graphics card or running ati overdrive turn it off. May need to add a few fans to keep your system cooler.. not sure but good luck.
I surfed around for a while for a solution for you Anti-Spoon and theres alot on info and simular picures of same problem. Seems like many many solutions but its really hard to pinpoint exact problem. Ideas from reinstalling video drivers , or Direct X drivers to opening your case and putting a small portable fan directed inside to keep it cool..lol
I had a massive problem last week with my OS and had to reinstall was going to go to Vista beta but im going to wait until it comes out in January and just get a all new custom gaming system from Dell and run dual ATI Radeon CrossFire video graphics cards. If any of you want my ATI X800XT Platinum Edition then let me know.
Hmm.... I know in Half-Life you could get that effect by noclipping outside of the map. Basically it doesn't have anything to draw, so it just leaves whatever was previously there. That's how it duplicates it like so. It seems like your skybox just disappeared. Maybe a texture problem. Not sure. Make sure you've got DX9c and the latest drivers for your card. If you do, and it still doesn't work, then try redownloading DoDS.