I have noticed strange dotted/aliased lines around the edges of blocks, when the player moves they flicker.

Very noticeable around stone blocks in dark areas.

It is almost like the blocks are missing 1 pixel from each edge and I think I can see sky.

Video Settings:

Graphics: Fancy
Smooth Lighting: Maximum
3D: Off
GUI Scale: Normal
Brightness: Bright
Particles: All
Fullscreen: Off
Render Distance: Far
Performance: Max FPS
View Bobbing: On
Advanced OpenGL: On
Clouds: On
Server Textures: On
Use VSync: OFF

I have experimented with changing all the settings but I still get the same effect.