Your system is very similar to mine, however, I?ve seen/had this problem before (is not good). What is your motherboard make and model? And what chipset is running on your motherboard?
I myself haven?t updated to the new Catalyst drivers yet(no need to spend the time on my modem right now, really).
As far as possible other reasons, at all cost, Melty should be run in 16-bit mode on Radeon?s. This corrects graphics issues even I?ve had
with Melty Blood. The other option is to try getting a hold of Melty Blood ReACT. It has yet to cause me any problems on my Radeon 9700 Pro.
Enabling alternate pixel center in the driver panel for DirectX helps Melty. Turn it off for other games though!
As far as what I can remember for experience your particular graphics issue (and yes, I have), I believe I had to disable Fast writes in the bios, which should always be done on Radeon?s anyway. If that isn?t it.. and if you have an evil VIA chipset as I?m suspecting? well, you don?t want to know what happened to that motherboard.
Built by ATI Radeon 9700 Pro
512MB?s Mushkin DDR 2700