http://youtu.be/9YnZZWq2Sus

I was playing on my private, vanilla survival server, and I decided to turn up the render distance. when I did that, I was presented with the visual effect you can see in the video.

I don't know why this is happening, but I have a suspicion it has something todo with the 'view distance' in the server config. if that is the case, it was on 10 (I was trying to use render distance 32)

I have attached a crash file generated by holding f3+c for 10 seconds in case thats required.