Hi,
Aye, what you see there in the screenshot is the default texture of Crystal Space. The models are tufts of grass; they should be using the texture grasstuft01.dds. And they actually are. The problem is, when coming from hydlaa plaza to that region, it doesn't load this texture, as the program thinks it is already loaded (bug #1664). If you log out in that area and join again, the textures appear fine.
In any case the problem is not on your side, it appears on all clients. Hmm, not sure if "keep all maps loaded" would avoid this problem... I don't use it myself.
Thanks,
- Cherppow