Emulator

Did you tried to enable "Safe texture cache"?

Yep, no change.
Tried in x86 and x64.
Config: W7 x64, ATI 5850, Intel C2D E8400

Screenshot better than long words...
http://img7.imageshack.us/img7/1628/88116650.png

Try installing Catalyst 9.3 (or something like that).

I can't lol! My card is available since late 2009, so Catalyst 9.3 won't recognize
it. Actually I have Catalyst 9.12 or 10.x, I don't remember. But as far as I know,
my old X1900 card does the same issue than my HD5850, whatever the Catalyst version
is.

I can confirm that it is not related to the Graphics card, as I have tested on a
nVidia 8600 too, an a different system.
Any idea of what's broken?

This is the same as Issue 267, except for the text issue. I have some details in the
comments about the problem.

Issue 267 should not be striked anymore: it was fixed in the 1xxx builds, but was
back in 3xxx builds, and is still present on latests revisions, in both D3D and
OpenGL (on both ATI and nVidia cards).

The floor texture issue disappears if you run at native resolution.

Not for me (and this option doesn't exists in DirectX).
Tried in OGL with Native checked, nothing changed, disabled all other options => same issue.
And even if it works for you, well it still need a fix ;)

Enabling safe texture cache in M&S Olympic Winter Games fix letters for me. However the game still doesn't work.

Gonna check this out, doubtful it's still an issue.

About letter issue, it's fixed in D3D9/11 and OGL.
About the floor issue, it seems that it has been fixed very recently, around 3.0-6xx builds, but only in D3D 9/11, not in OGL.
Moreover, there are graphical issues (picture is kind of stretched) on the left and right sides on the screen IF you run the GC BIOS first.