I was going to mention trying out different graphics card drivers (newer, older, beta) since I have a faint memory of having some weird issues with some drivers while using a GF8800. However, you mention you can actually re-produce it on another machine? What similarities do they have, if any, and are there any differences with the issue or does it appear exactly the same way?
I have not been able to re-produce it myself still. For the time being, I do not have a machine running with winxp, though, and it has indeed been closer to 2 or many more years since I last time ran FFXI under that OS. I will keep on trying things though, and maybe install a winxp somewhere even which might be something I would have to do to be able to re-produce the issue from the looks of it.
I am more and more thinking of an issue related to software drivers such as the graphics, or keyboard, or the other, but can't really think of anything specific to try other than different versions of drivers and just general trying-to-eliminate-the-possibilities game.
Sorry for no real ideas at the moment; just some thoughts~