Legendary, when I stand - it's normal, it doesn't make his feet sink down.
When I'm walking, it does. I use 'LOW' on the shadow settings. I had the Cesar skin.
I also tried to be where you were.

THERE IS NO PROBLEM WITH HIS GTA3 FILE OR GRAPHIC CARD PROBLEM. EVERYONE HAS THIS BUG. YOU CAN'T FIX IT.
You might be wrong after all. But it might be his current location, or just the skin.
I don't think it's your graphic card.