Hi Andrew,
Your processor is running too hot for sure. Was that my system I'd be ripping off the heatsink from the processor, cleaning the chip core thoroughly with metho, and fitting a decent 3rd party heatsink to it using Artic Silver 5 thermal paste instead of the crappy stuff that AMD recommends. I've done just that to a 2400+ system of my own that was running too hot, and it's worked wonders.
Leave that RAM at the same speed as your FSB, because your system will be faster like that than if you have it at a higher speed ;)
But most of all, have a look at your display card. That 'tearing' in the picture you linked is indicative of a video card that's overheating or overclocked! Check your system first, of course, and make sure you have the most up to date drivers installed for motherboard and display card, and make sure you have DirectX up to date as well. Format and install clean, for preference, so you can eliminate software problems and system file corruption as a possible cause.
Snowy artifacts and image tearing is bad, mmkay? If all the things mentioned don't fix it, then you might have to fit a new heatsink/fan to the display card, or even replace the card altogether.