Shit...

I traced this one down and fixed it a while back, but I've forgotten what I did.  Will look into it and get back to you.

Edit: I uninstalled it so I can't go digging through my settings.

I did however look into the problem again, three things to do.  Disable hardware sound, switch to 16 bit, and lower the detail settings.  All or a combination of them are required, it's a fubar game that used a screwy engine with subpar support by later Nvidia cards and drivers.  You may have to zero out the detail, but I'd go notch by notch to begin with, you probably have the sound glitch as well from your description.

This guy has left the forums a while ago.

yea i know its a nightmare to fix, other issues are the easy ones to resolve. My main problem and the biggest one is Nvidia seems to be the series 7 and series 8 that have the biggest issues. I play with an ati runs golden on my machine no problems what so ever even on windows 7. Still i want to get a fix asap for the other gamers don't wanna turn people away just because they wanted a Nvidia card over an ati.

Have you considered using the http://www.fleetops.net/ mod? It has a number of graphic improvements over Armada and there's there's an active community.