I've had the same exact issue. All objects directly in front of the targeting box has black square shapes in-front of it as if you were looking at an object through a lattice work or a fence. Running with the explorer off did correct coloration issues and the compatibility fix did allow for installation of the game on my Vista machine. But no fix i've found anywhere seems to fix those black boxes. i tried to ignore them but keeping my eye on a Tie in a dogfight is impossible when they are nearly completely covered in black nothingness.
I think it's my ATI acting up. I'm at a loss for what to do now.