Im finaly happy to say the my problem is fixed. ill explain the cause and how to fix.
Ok the first thing you need to check is go into start>run>then dxdiag then go to the display tab. make shure that at the bottom that these three options are enabled
if not this is the problem to the heavy pixelation you see. Ive seen a bunch of solutions for this and many didnt work. first ill show you what worked for me.
not too long ago i installed a RAC server on to my computer. a RAC server alows the remote viewing of a computer. ive learned that some services with remote view will nullify directX somehow. Anyway if you have RAC server uninstall it then go to the folder and delete the folder its self. after a good restart i checked and directx draw acceleration was fixed and so was AGP texture acceleration. (also if you have win2k srvr services running that could be the problem also).because of this a game that required directx draw worked and all my pixelation is gone
one other fix that i came across was quite bizarre it requires you start up the program called Netmeeting. fill out the form start the program go into option and enable remote viewing. then continue as if your installing then go back to options and disable it. this didnt work for me but it did work for alot of people.
i hope this helps you guy with similar problems.