From starting a new world playing with a chunk distance of 10 works fine. Increasing this appears to corrupt the world in huge areas. The higher the chunk distance the worse it gets. I've tried this up to 18 chunks. This is visual only, the world is not corrupted. This appears in single and multi-player. See screen shots.
Also, from certain angles there appears to be huge animating entities (screen shot 13_58.01)