I would not recommend installing graphics updates directly from a vendor for the Mac. Apple takes care of bundling your graphics updates into its system updates, so don't worry about that. Trying drivers directly from a vendor is more likely to create new problems than to fix existing ones (assuming you can even get them to install in the first place).
Hrmmm... Just to be sure, make sure you have the following lines in psclient.cfg (note both are false):
Video.OpenGL.Shader.Cg.Enable.Fragment=false
Video.OpenGL.Shader.Cg.Enable.Vertex=false
If you haven't already, try reinstalling. I'm not sure what else to try, but if I think of anything, I'll let you know.
EDIT: Note, if you reinstall, make sure you apply all the other fixes, such as changing psclient.cfg again.