Has anyone found a fix for this? I've been having this issue since release on my Win 7 x64 system, nVidia GTX260. Setting Tessellation to Low causes the terrain textures to start wigging out exactly like the screenshot in the OP, but Medium or High works fine. It's just the terrain textures, too. City/unit/wonder graphics are just fine (again, like the shot in the OP).
I've got the latest drivers (260.99), didn't fix it. I've put my CPU through OCCT/Prime95, Memtest on the RAM, and OCCT VRAM/artifact tests on the GPU, everything checks out. My GPU temperatures in-game sit nicely around 55C or so. It seems like very few people are having this issue, since I haven't been able to track down any posts related to it elsewhere.
Maybe this belongs in the bug forum now? Seems like a few people found out how to reproduce it on their own hardware at least by changing the Tessellation setting.