Same thing happened to me but to a lesser extent. I made a thread about it herE:
Frequent weird window redraw issues
New graphics card from the ultra-cool Xenex fixed my problems right up.
Agree if you have any warranty left on your mac I'd be making some noises about a replacement.
Edit: Meanwhile, the title of this thread pretty much guarantees it will never help another person. PLEASE use meaningful subjects to your threads. stuff like "HELP!" and "HAS THIS EVER HAPPENED BEFORE?!!!" make it far less likely this thread will come up in searches in the future and thus recuce the value of the thread.