First up, welcome to the forums.
The most obvious question would be: was the card acting up like this at his place? Do you see any corrupt images elsewhere, such as with Windows effects, or during bootup? The reason I ask, and I'm currently going through this right now, is that it's most likely that the card is faulty.
One thing you can try is to use an older set of drivers, such as Catalyst 4.12. Then, work your way up from there. Also, when you change drivers the best method is to uninstall them through add/remove programs, reboot into Safe Mode, and clean the old drivers properly with a program such as DriverCleaner Pro which you can get off of
THIS site. In the program you should pick, and clean every instance of an ATI listing, however do not clean any of the IGP listings. After that's done, reboot, and install the drivers as usual.
If changing the drivers doesn't help out I would suggest trying the card on your friends machine. If you get the same grapical glitches... get your money back. IF the card is still under warranty you could try sending it in for repair. Otherwise there's not much else you can do.