Hi Ethan,
It rather looks like you have an resolution issue with the texture,
it's so low that when the tiles a divided the sampling of the texture
results in the blocks - this is what you'd expect when you switch off
interpolation of the imagery. Please just use the defaults, you'll
tend to get the best all round results. Also have a look at the
source resolution of the imagery and DEM's. The VPB project is
written to scale up to handling terrabytes of source imagery and dems
so through what data you have it.
Robert.