I too was running into the LOD issues, as well as nasty stuttering; particularly in built up areas. This was with:
I7 920 @ 4GHz
6Gb (3 x 2Gb) DDR3 Corsair Dominator TwinX @ 1600
2 x Corsair F120 SSD (RAID0)
Asus HD 5970
Last night, I switched the 5970 for 2 x GTX580s, and, although I have not had the opportunity to spend more than a few minutes in game yet, my brief testing shows the issues to have gone. This was having seen a friends machine (very similar spec, other than his GPU which is a GTX295) running ArmA much more smoothly than my 5970 (with regards to the built-up area stuttering).
It wasn't only in ArmA that I was having issues. Some other games I play were also suffering, and now working as intended!
Having had a mixture of ATI & Nvidia GPUs over the years (both desk & laptop cards), whilst I don't think there's much to chose between them on the hardware side, I have had more software/driver issues with ATI. Of course, I'm sure some have had the opposite!
I know going from the HD 5970 to GTX580 SLI may not be considered a huge upgrade, certainly given the costs involved. I do have a huge feeling of relief that the games I play, now seem to play well!