I believe I solved this issue of my Acer using Low end HW when running the screenshot taker (FRAPS) while playing Alter Ego (which causes parts of peoples' bodies to poke through things they should not like Emily's legs poking thru the laundry table when she is standing behind this table for example) by running Alter Ego in my Dell M1530 laptop that I have XP (and NVidia with no Optimus) and I found that, by running Alter Ego in the M1530 under XP with the screenshot taker running at the same time caused no graphics issues whatsoever.

My hypothesis is that the Optimus technology in the Acer's NVidia had caused this - what do you think, Inland and Jenny? Did the Optimus cause the swith to low end graphics upon running the screenshot taker with the game?

Thus, I did a full play thru and finished Alter Ego with no graphics issues whatsoever under XP in the M1530.

Yes, Optimus has been known to do that with games where it doesn't correctly sense that the game needs better than low end graphics. I suspect Optimus might be more prone to have this problem with 2.5D games (3D characters on a 2D background) than with fully 3D games, but running the screenshot program alongside the game may have also caused a problem.