It's not quite possible to nail down the cause as being the PSU. But you're right to be very suspicious.
Cranking up the graphics settings and having those problems might also point at the video card having a fault of some type.
But cranking up the graphics settings can also boost the power requirements pointing back at the PSU.
The best troubleshooting step I can suggest is to replace that 'possibly exploding' Green Star 550w with a decent PSU.
Read this article @ Hardware Secrets: Huntkey Green Star 550 W (LW-6550SG) Review