When I first start a drawing this problem is non existant, I can even cure it for a short while by restating AutoCad for a few minutes.
When using any of the Layer commands such as OFF, ON Freeze, Previous and so on; the changes will not take effect until I hit the Layer Control on the Layers toolbar, then display is correct. Sample hit the laer off icon and layer remains visible but items can not be picked, hit the layer control and layer disapears from the display. Hitting the layer previous works the opposite, once you hit it items can be erased without seeing them on the display, once again until the layer control toolbar is picked.
W7 Ultimate 64-bit; i7 CPU; 12.0 GB RAM
ATI Radeon HD 5700 Series 1024 MB Dedicated & 1787 MB Shared System Memory