This happens in any game mode.

Render distance fog in the Nether is far closer in all 1.7 versions and snapshots for 1.7 than it was in 1.5 or 1.6. It is also pitch black, which makes it even harder to see.

Edit: You can also see that in 1.7.1, my fps is much lower. My pc isn't great to begin with but the fact remains that there are performance issues. I shouldn't be getting 8-10 fps on any render distance beyond 2 chunks and even at 2 chunks I only get about 20. In 1.7 pre, I was getting 40-50+ fps average and at 4 or 5 chunks, close to 40-50. On 7-8 chunks, 20-30. Now in anything 3+ render I get less than 15 fps in 1.7.1.

Edit 2: In the final 2 pictures, the 1.7.1 far render (12 chunks) picture is fully loaded. In the 1.6.4 Far render picture, I didn't even bother letting it load for more than 5 or 10 seconds. The red 1.6.4 fog is still further away..