a. L2 cache Symptoms, such as an inability to install software that uses an Installer, due to an error message that says "unable to decompress file." has required installing an extension that disabled the L2 cache (as outlined on an Apple web page and as previously described here at MacFixIt). Although the problem may not occur in Mac OS 7.6 or later, Apple confirms that the L2 cache on affected machines (which should only be a small percentage of these models) is defective and will replace it.
b. Video display A pair of similar symptoms have different solutions:
(1) video jitter at the edges of the screen or windows and (2) blurry video when the monitor is at a higher resolution than 832x64. Replacing the logic board will be necessary for the former symptom; replacing the audio/monitor connection subassembly will be necessary for the latter.
More generally, Apple notes that monitors connected to Power Macintosh 6500 computers should not be set to resolutions above 1152 x 870.
Serial numbers for jitter problem:
PM 5500 from TY705xxxxx to TY715xxxxx
PM 6500 from XB708xxxxx to XB718xxxxx
Serial numbers for blurry problem:
PM 6500 from XB708xxxxx to XB723xxxxx
Some of these issues were also mentioned in a recent MacInTouch column in MacWEEK (as we noted here last month).