Everything is up to date on my computer, and i'm running windows Xp. Here is the startling image I get when I load up my game. I have no idea what to do at this point, and I have an 8400GT Nvidia Graphics card. Anyone with a similar issue?

Yes, I had this exact same issue using anything but Lowest Detail under the Graphics Detail Level in Setup.exe.  Try using the Lowest Detail setting and see if your graphics are showing properly.  If so, you can use the Custom option, enable every single checkbox, turn Draw Distance, Rain Splashes and Water tiling all the way up, then press Ok.  You can also change your Color Depth to 32 bit.  Then press Save & Exit and try launching the game again.  Your graphics card should more than handle all these settings.

Let us know how that goes.