MAJOR OMGWTFBBQ EDIT:
Only realised now that yes, it has smooth performance but it retains the 'can't select stuff in the 3d view'. Mod close this please, didn't realise it didn't fix the actual problem. :S
Stupid moment +1

For starters, I'm guessing this isn't the place to put this topic. Secondly I know many people have already been suggesting other fixes to this but I'd like to share mine (which surprisingly works fine for me).

How I fixed mine (under XP) was I got the 'atioglxx.dll' from the system32 folder (for those who don't know where that is: Windows/system32) and placed it into my Hammer folder. So far, viewing a large map with texture filter on runs smooth.

Hope that helps anyone using an Ati card w/ the latest drivers.