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edit:
after a little more ♥♥♥♥♥♥♥ around with it, it seems the "depth of field" option under "effects" in the pause menu under "options" is what's screwing with the display. it's got to be on for the "wavyness" to display in both the afore mentioned levels.
What you're seeing is typical of the shaders in question not taking into account rounding errors on floating point numbers.
The shaders that compose the wavy effect probably contain a conditional statement to check if a certain number is equal to zero, because they need to protect against division by zero. Doing a real equals zero check is a big no-no in graphics programming as it does not cover small fractional values such as 0.00000001 that may occur due to rounding problems. Instead, you're always supposed to check if the value you have is smaller than a certain very small constant (usually called 'epsilon') to implement such checks.
If you don't and such a minute number passes through and is subsequently used in division, then numbers skyrocket outside the expected result range. Depending on how the remainder of the shader is set up exactly, this may result in stretched out bars of (near) uniform color.
(Really; I'd wager nine out of ten times if you see a shader 'spaz out', then the above story is the underlying issue.)