Huge Graphical/Texture Issue with 1.7.2

I am having an insane problem with the new update (1.7.2). I updated fine and started a new world in survival. However, I found out that whenever I scrolled to an item such as a torch or a sapling in my hotbar all blocks became transparent except for water and lava. To fix this I have to exit Minecraft completely and relaunch.

I expected to just be able to hold the items like normal with no problem.

A massive glitch that allows me to see through every block in the game except lava and water. Not pleasantly. Game-breaking.

NOTE: I can press F3+T to reload textures and, as long as I don't have one of the problematic items selected, see everything again.

1. Launch Minecraft.
2. Open a World. Any world created in any version.
3. Hover over an item such as a torch, a sapling, or a flower in your hotbar.