Re: Learn a lesson from droded.
I seriously doubt this has anything to do with modding. More likely, your video card is getting screwy (it rendered the water in ultra-low quality, for example, which is an "effect".) It looks like it's not applying the texture right, either. If you're not experiencing this in other games, it may be that Fable loads up and applies textures weird (it IS a port, after all, designed for a totally different architecture.)
I suggest saving your "my games/fable/" directory to avoid losing any saves/characters and reinstalling the game - just to be sure it has nothing to do with modding.