See Video - something very odd with the graphics

Have you tried disabling Netbook Mode?

I thought netbook mode only mattered if I was the host. I tested this out on a klei official server afterwards and it was fine, so maybe there was something wrong with the dedicated server. However, this is the second time in the past couple days that I've been attacked by something I can't see. Both times the first attack happened after I dug up some graves (this part was not tested on the Klei official server). 

Wanted to bring some closure here for the developers since this game is awesome.

 

As Tykvesh pointed out, it was because netbook mode was enabled. It was truly bizarre because it happened on a few other dedicated servers and since no one else on these servers were having these problems, I tried disabling netbook mode and that solved it.