This is a bug with the drivers apparently....I experience the same thing. THe problem is textures on max. Turn it down one notch and it should be good until they fix the issue....
Start a ticket with AMD. THey had a knowledge base article on it, and it said that they were aware of it and were trying to fix it.....but they deleted it..... You can still see the hit if you search for 'Unreal Tournament 3', but it's a dead link.
Anyhow, I've tested this thoroughly, and the only setting that causes it is texture detail. I've tried changing Catalyst AI too.....no difference.
This problem never happened with the original version.........1.1 broke it.
This issue has also spanned across a new Vista x64 install and three different sound cards, so it's DEFINITELY a driver bug. Don't go reinstall your graphics drivers, etc. because you're just wasting your time.