Platform: PC Windows 7 64-bit (also happens in 32-bit version, happens in Vista 32 and 64 bit versions also)
ISP: AT&T
Type of Internet Connection: DSL
Internet Connection Speed: 2.57 Mbps DL / 0.34Mbps UL
Frequency:Always
Area and Coordinates: Any
Monster Name: Rocs are the most obvious example but occurs with many textures and objects (another example is the face armor on the Conflux Surveyor, Cruor Prospector and Atma Infusionist NPCs)
Textures will appear to flicker, as stated above Roc type monsters are the most obvious example (their wings will flicker when then they are idle)
It doesn't appear to be a problem with any specific video card. I have seen the same problem with every Nvidia and ATI graphics card I have run FFXI on.
After further testing it appears to be caused by Windows 7/Vista forcing FFXI to use Shader Model 2.0. (FFXI is a DirectX 8 game and uses Shader Model 1.0) ATI's graphics drivers have a registry setting that can be used to restrict the maximum pixel and vertex shader version allowed regardless of what the video card actually supports. When Windows is restricted to Shader Model 1.0 (1.1 and 1.5 also work but Pixel and Vertex shader versions must match) then this problem goes away completely.
However this is not a solution because Windows Aero stops working (it requires Shader Model 2.0) as well as any games that needs Shader Model 2.0 or higher.
Note that this ONLY happens in Windows 7 and Windows Vista. It does NOT happen in Windows XP.