I am having the same problem with the graphics where it can jerk about and make the game unplayable, thought it might be the joypad playing up so i uninstalled it and it made no difference, it can throw the helipocter 2000ft into the air or into the ground in a split second.
Also the game randomly crashes/lock up when starting up and i have to restart the system.
Could this be a processor problem as i also tried it on my older spare machine and it has the same problem, both are dual core processors (amd & intel) and both are using nvidia cards.
It seems a lot of older games (direct x 6.1 & 7) really seem to struggle on modern machines even though the cpu & gpu aren't being strained. (Freespace 1 & 2 also lag quite bad at times). Anyone know if this directx related or an Nvidia driver problem ? (i hear ATI cards have much better support for the older drivers).
A lot of games now are having problems with new Nvidia drivers, in that they weren't tested with those drivers at tghe time (natch). Even newer games are having the same problem, eg. Empire Total War.