Hi, I've experienced some weird glitch (or maybe a feature). It seems that around my character is a circle that limits visibility of other objects, so that my character is always visible. I suppose it helps me find my character in the environment, but it is really distracting and I don't remember it being on the original NWN Diamond edition.
Is it possible to turn it off somehow?
I already tried turning off every graphical option in the in-game options, but none helped.

That's a new effect they added with the patch from last December, it's called Keyholing or Keyhole Dissolve, and like you said, it's meant to ensure your character is always visible. It's a trade-off, and a matter of preference: the good thing is that it makes the "Hide Second Story Tiles" option obsolete, so you can now display higher walls again, without having to worry about them obstructing your view, but it can be a bit weird sometimes and mess with how things were originally meant to look as well (e.g. in cutscenes etc.). Personally I would also have preferred a simple round circle to those jagged outlines.

Fortunately, you can customize it or toggle it off, and you have two options for that:

1. They also added a new, if inconveniently hidden menu that you can access by pressing Ctrl+Shft+F12. Click on the Config tab, then type in keyh in the Filter search field. Here you can either customize the size of the effect, or shut it off completely (uncheck "Keyholing").

2. In the regular main menu, click on Controls, Change Key Settings, Misc., and assign a key (e.g. "Z") to "Enable Keyhole Dissolve". Now you can toggle the effect on and off in-game at your leisure/as needed, just by pressing that key (e.g. "Z").