Thank you BASys for your detailed analysis.
I was in a hiatus last month before coming back to use FSX. However during that period I did update my graphics card driver.
So when I go back to FSX now, I see this. My setting has not change before and after my hiatus. Everything was running fine before. I tried deleting the config files and let FSX reload a new one but to no avail.
The blurry terrain may be the fact that I open up FSX and immediately slew up and move forward so that I can get the above picture without waiting for FSX to load the terrain properly because that night I could take this blurry words anymore.
Regarding the issue of too many open applications and processes, I do not think this might be the problem. Because the plane I was flying to take this picture was the Ultralight and my only open program apart from FSX was Firefox. Before this problem I would open programs like Media Player, Google Earth with no issue at all.
Anyway I am running on a Core 2 Duo E4400, 3GB DDR II RAM and an ATI X1550 graphics card. Will this be fine? I really feel like getting a NVIDIA card when I have the $ - which one will you recommend.
Oh and can I use FreeRAM XP Pro for Vista?
Once again thank you all for the help