In most cases my 8800GT is fine, BUT if I hop onto a flight in Northrend (my own flying mount is fine), the computer (only 2GB RAM) will swap thrash (I can hear the hard drive grinding away). Dropping texture settings down one notch stops that. My guess is that it's trying to swap textures in/out far too quickly when there's that much terrain visible and you're moving so fast.
Now last night Dalaran skipped and lagged all the time, but that was just because it was insanely overcrowded. I haven't seen a queue on my realm for over six months, but it came back today.
------------------ *disclaimer* I am not now, nor have I ever been, an employee of Best Buy, Geek Squad, nor of any of their affiliate, parent, or subsidiary companies.