Hey folks! I'm not one that's a proponent of necro-posting but I just had the same issue myself. Seeing as I decided to correct the spelling on the old posts anyway, I may as well post a solution - even if it is 3 years after the fact. Let's just cover two possible solutions, one of which was already posted in a different form above. For illustration purposes, here's my own graphical issue.
1} Option A: Disable Vertex Buffer Objects "Open the swkotor.ini file with Notepad, scroll down to the section marked [Graphic Options] and add the following line: Disable Vertex Buffer Objects=1 Save the file then run the game again and everything should be fine. For future reference, this fix is listed on the LucasArts website in the "Yoda's Help Desk" section for KotOR. If you need to look it up again, it would be quicker and easier to just go there." (Quoted from a previous poster yonks ago to save time. Remember to copy that line exactly as you see it (Copy & Paste) underneath everything else in the Graphic Options sections. Just press enter and add another line to past it in. It doesn't seem to have much of an affect on the game's eye candy, but it sure does make an improvement to its playability.
2: Turn off Grass:
By the way, this is the one that solved my own issue. YMMV.
In your Graphics setting in the game, un-check Grass - as shown here.
The results?
Again . . . sorry about the necro-posting.