You shouldn't need any update, GG games worked fine for me in each version I tried.
That's said, I remember I already got this too while I was experimenting the GG Extra option (or something called like that).
Apparently, this let you see the graphics that are rendered by the video chip but are not displayed on LCD, on the Sonic game for example graphics are not garbled and fit with the rest of the screen (though on most games they don't).
Anyway,solution is easy: turn OFF the GG extra option since you might "accidentally" have turned it ON.