Sorry razazel, but since opening this request there has been a solution to the issue which i made the request to resolve.
The solution was to upgrade to the new AMD Crimson drivers (just for your information)

So...

• We now have a solution for AMD Radeon Cards, Updating to AMD Radeon Crimson Software 16.3.2

So far the confirmed fix for AMD GPUs is to update your drivers to the latest Crimson? Software depending on your GPU model

YES it worked i have done the exact same as you and there is no more flickering blue trees

The bottom line has now become if my driver update works i am fine if it does not i wont be able to play Arma 3 anymore unless we get an option box for legacy LOD blending

on second thought i am now attempting to install the new crimson driver again i hope this works

• The problem i have with the driver updates are even if i complete the install and all components are properly installed no 3d application will work and i have had to do this cycle of pain to downgrade 3 times hopefully this attempt will work

One question
HOW?
the crimson software minimum supported cards are the HD 8000 series?
or is there a new catalyst driver or something?

Well that's were this becomes a bit more complicated you see
Scenario A:
If we do not get an option box to choose the LOD blending state and it is driver related

I can confirm that this is an issue with AMD GPUs ranging from the 7000-8000 series
I am using a 8780 2GB and i have the same issue it only began after the LOD blending update and the geometrical occlusion seems to also play a part maybe a combination of the two is the issue