How much VRAM do you have? Go to the start menu, select run, and type "dxdiag" in. Select the display tab and see what it says under Approx. Total Memory.
Also, have you tried doing as it suggests? I can't recall whether 1.61 will wipe your .ini settings, but if it doesn't, you might try setting everything down to low detail in 1.09 and then installing the patch.