That looks like an OpenGL draw/version issue with independent screens/resolutions. Definitely roll back the driver on that and mark that version as dont use.
Were you able to resolve this problem?
I am having a similar problem when I try to capture anything on multiple Windows 7 systems with different nVidia graphics cards. After approximiately 5 minutes of capturing 720p video, the screen starts flashing in the same way and will not stop. It does not matter what input device I use. I did not have this problem using Adobe Premiere CS5 - it only started after upgrading to CS6. I've tried multiple graphics drivers, multiple computers, multiple inputs.
Sadly the way I resolved the problem was to dump money into a new video card. For some reason the card I had, which was a GREAT video card, would not work properly no matter what I tried. Adobe couldn't help so I gave in and bought a card. Works great now and I also have Mercury hardware playback as well, so that's a plus.
Wish I had better news for you.