I haven't played Watcher's Keep yet, so I can't help you on specifics...but I can help on the other questions.
As for your video, I'd make sure that the game configuation is set to a level that your video card can handle, first. Second, check to make sure your drivers are current. Third, what version of DirectX do you have? You might want to download the latest.
Also, if you've downloaded any third party patches to SoA, they could be causing a problem.
Lastly...the Cloak of Mirroring. That was changed in ToB on purpose. Per Bio/BIS, the cloak now just absorbs spell effects (a la Spell Trap) instead of reflecting effects back to the caster. They nerfed it because it was felt to be too powerful.
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Now where did I leave that doughnut?!