I have the exact same problem. I have the newest drivers for geforce4 mx 420 (61.77) from nvidia. I also have a problem in Conker where the ground textures turn white or foggy depending on the camera angle.
There are two fixes for the Zelda bug.
You can either use the gl64 plug in. Or you can download the omega nvidia drivers, which from reason produce better graphics for n64 emulation, but you'll lose like 20 fps in games like diddy kong racing.
The omega drivers will make games like zelda and conker's bad fur day nearly perfect, but all the game will run at like 10 fps slower then the regular n64 so its whiles its not horrible, its noticable and annoying...
I still dont' know how to fix the Conker's Bad Fur Day issue with the nvidia official drivers....anyone wanna help? I have sp for 1.5 and the unofficial one also. I'm using jabo's latest driver and when I check the different boxes under graphic settings, none of them fix either the zelda or the conker issues.