PS2s have some issues when booting certain games. In short, in PS1 mode the GPU is emulated using the EE, and this EE applies some per-game patches. As tonyhax uses an unsanctioned way of loading games, the EE is never told it needs to load new settings for the new game, and thus the old one's settings might not be fully compatible.
That also affects the video issues. In fact, if you try with tonyhax v1.3.1 it's highly likely you are gonna experience the same issues, even though tonyhax v1.3.1 uses the exact video settings a stock PS1 BIOS uses, and thus leaves the game with the video settings it's expecting as if had been booted through the BIOS.