The other suggestions I'd have made have been made--such as check your ram and PSU...but I think you should begin with this one:
If your 6800 is overclocked beyond its nVidia factory defaults for the particular 6800 gpu you own (as the marketing name of "OC" seems to indicate) then I'd use Coolbits to lower the gpu clock to the nVidia standard clocks and try again.
Ditto any cpu/fsb overclocking you are doing in your system, if any. Set all clocks to factory default and then see if the problem repeats.
Remember that nVidia doesn't warranty or support the overclocking that some nVidia OEMs (like BFG) do to try and make the cards run faster to attract more business. There's a good reason nVidia doesn't support 3rd-party overclocking directly--they don't test and validate their gpus for overclocked conditions.
At 1600x1200 you are putting maximum stress on a 3d gpu when running a 3d game at that resolution, and as such, in a game serving up the right conditions, even a relatively "minor" gpu overclock could cause the gpu to fail--so find out what the stock clock is for your gpu and set it there and you may well see the problem disappear. It's very likely as you do not apparently have these problems under lower resolutions in the game at the "OC" setting.
The only time I ever experienced the "infinite loop" graphics error under XP was way back in 2001 and when I'd first installed the OS and was running a nVidia GF4 gpu. But in that case *all* my 3d games were affected equally--in that none of them would run at all.
It turned out to be a problem between the VIA chipset I was using at the time and Windows XP--in that I was running the fsb clock for the ram bus at a higher speed than the fsb clock setting for the cpu (asynchronous operation), and although the same video card and VIA chipsets and games had no problem running this way under Win9x, XP would tolerate nothing but synchronous clocking of the ram and cpu buses. As soon as I set up synchronous timings for the cpu and ram bus under XP the problem completely vanished.
But since this is apparently a problem you only get in this game at this resolution, my bet would be that something overclocked in your system, or just your overclocked gpu if nothing else, is causing the game to fail because of being overclocked. Because the problem is resolution sensitive, my bet is that it's the "OC" clock of your gpu causing the problem in this particular game.
It is well known that I cannot err--and so, if you should happen across an error in anything I have written you can be absolutely sure that *I* did not write it!...;)