This sounds like another graphical issue I ran into when they were testing the tev_fixes_new branch.
Do you have Per-pixel lighting enabled?
edit: nevermind, just saw in your post that you tried per-pixel lighting.
Just tested on 4.0-1350: the only PAL dump I have is for Pokemon XD. No issues there. Tried Super Smash Bros Brawl, Sonic Colors, and Kirby Return to Dreamland (NTSC versions), and no issues
Do you have Per-pixel lighting enabled?
edit: nevermind, just saw in your post that you tried per-pixel lighting.
Just tested on 4.0-1350: the only PAL dump I have is for Pokemon XD. No issues there. Tried Super Smash Bros Brawl, Sonic Colors, and Kirby Return to Dreamland (NTSC versions), and no issues

