The vid card has some problems.. Could be overheating, overclocking, bad video RAM, bad drivers. Do you get screen corruption outside of Windows too? A la BIOS logo screen or the initial WIndows logo? If yes, then it is a hardware issue.
Try and borrow a card off someone to make 100% sure, but 99% chance it's FUBAR.
If it isn't overclocked & you are getting that much, um, artifacting for want of a better word, it's bin material.
It's obviously AGP, you should be able to find suppliers clearing old stock - ie 6600GT, maybe even 7xxx series etc relatively cheap and giving huge performance boost.