I saw the hall of mirrors effect also. Usually worst when I was zoomed way back. I suspected that it was due to the camera getting too close to or even slightly inside a wall or ceiling. I tried adding a fudge (using a trace at 110% of the camera distance to the player or so) to keep the camera from getting too close to an obstacle. That did seem to help somewhat, but even with that, I never was able to eliminate it completely. I finally just decided to let it go.