First I am running:

AMD 955 Black Edition 3.2GHZ Quad-Core
4GB 1333MHZ Ram
Radeon HD 6870 2GB

I am running everything on max including AA and I am getting really pixellated choppy cutscenes and dialog scenes, is this a problem with the game itself being (not so)old or something else? I have updated DirectX and I have the latest ATi drivers. The game itself is fine, no pixellation just when I get into dialog options and cutscenes. I'd attach a screenshot but everytime I take one it is all black.

In the graphics options set lighting to 'low'. Only known way to fix the problem. Low lighting is much less noticeable compared to the pixellated, blurry graphics.

The Depth of Field setting is also known to cause choppy cutscenes, but not pixelation. If your cutscenes still run slowly but the rest of the game is fine, try toggling the Depth of Field setting. I had to turn it on, but other players report having to turn it off. It only affects the in-engine cutscenes, not regular gameplay.

Okay setting lighting to low fixed it, not the best solution... but it works :/ I'd like to have good lighting but I suppose I can do without.

What resolution are you playing at? For widescreen monitors, there are problems with screen tearing during cutscenes causing noticeable horizontal line distortions when you play with a 16:10 resolution. This is because the game resizes to a 16:9 resolution for cutscenes. The solution is to run the game at a 16:9 resolution.

For example, 1280X800 becomes 1280X 720 , or 1920X1200 becomes 1920X1080, etc.

This is just a guess on what your problem is since you have no screenshots.

This is a really common problem having to do with the screen resolution + graphics options. I get it on my 5:4 monitor as well. Interestingly enough, if you have Cat active, dialogs aren't pixelated at all. Something about the effect on the edges of the screen overrides whatever causes the pixels.

Personally, I leave the lighting on high, because it doesn't really bother me and I think the game looks a lot prettier on the higher settings. However, setting the lighting to low WILL fix the problem at least 90% of the time, as iamtheman said.