This seems related to a series of other issue with Radeon cards, but I've looked at dozens of them and mine seem slightly different.
Windlight works for me and can make some pretty pictures (See the attachment), but some features seem not to work.
In particular:
1. Water is 'flat' and lacks any shading what so ever. It also has very visible 'lines' between types of water hinting that no Shading is being done at all on water. Enviroment sliders have little to no effect.
2. Certain scuplties become not just clear, but 'windows' through all other prims in a sim until it hits dirt. It's like X-Ray vision. This however doesn't effect all sculpted prims. I wanted to capture a picture of this today, but I ran out of time before my daily commute. It shows me putting on a sculpted prim 'mask' that left my face a hole and then kept going through all the buildings behind me... This is fairly serious for a number of reasons.
3. Renderglow does not appear to work... Their is no 'glow', the picture below has renderglow enabled for it, but as you should be able to see it has no glow, I'm assuming that's because it's a shader effect and shaders out and out don't seem to be 'on' for my Radeon HD 3870.The options in the video section of SL's WIndlight viewer are turned up to 'ultra' and further I've selected 'custom' and bumped things up even another step in certain areas. My PC runs this way just fine (If a tad hot after a few hours).
There are also the 'usual' issues like seems and visual imperfections mentioned in other reports, but I hadn't seen the complete lack of shader support anywhere and I'm probably one fo the few to own the new HD 38070 cards...
Thanks for listening.
The problems you're having are most likely the same as
VWR-3184, so I've closed this as a duplicate and hope we can make things better soon – see Zen Linden's comments inVWR-3184.