Well I thought I had it solved, then it returned on bootup.
I was running VNC server in the background for remote admin, removed this and it seems fine again (didnt think to mention it!)
I suspect this was the real culprit as it interfaces with something VNC mirror driver as a graphics device.
Paradroid: for me its an ideal setup I can run everything from very low res arcade game to street fighter iv in 1600x1200 at authentic resolutions and refresh rates - I will try and capture some decent stills later on, but I am very happy with the hlsl effects.
here is my current config:
#
# DIRECT3D POST-PROCESSING OPTIONS
#
hlsl_enable               1
hlslpath                  hlsl
hlsl_ini_read             0
hlsl_ini_write            0
hlslini                   %g
hlsl_prescale_x           0
hlsl_prescale_y           0
hlsl_preset               -1
hlsl_write                
hlsl_snap_width           2048
hlsl_snap_height          1536
shadow_mask_alpha         3.0
shadow_mask_texture       aperture.png
shadow_mask_x_count       320
shadow_mask_y_count       240
shadow_mask_usize         0.09375
shadow_mask_vsize         0.109375
curvature                 0.0
pincushion                0.02
scanline_alpha            0.75
scanline_size             1.0
scanline_height           0.7
scanline_bright_scale     1.0
scanline_bright_offset    0.0
scanline_jitter           0.05
defocus                   0.0,0.0
converge_x                0.0,0.0,0.0
converge_y                0.0,0.0,0.0
radial_converge_x         0.0,0.0,0.0
radial_converge_y         0.0,0.0,0.0
red_ratio                 1.0,0.0,0.0
grn_ratio                 0.0,1.0,0.0
blu_ratio                 0.0,0.0,1.0
saturation                1.3
offset                    0.0,0.0,0.0
scale                     1.0,1.0,1.0
power                     1.0,1.0,1.0
floor                     0.0,0.0,0.0
phosphor_life             0.4,0.3,0.3
yiq_enable                0
yiq_cc                    3.59754545
yiq_a                     0.5
yiq_b                     0.5
yiq_o                     0.0
yiq_p                     1.0
yiq_n                     1.0
yiq_y                     6.0
yiq_i                     1.2
yiq_q                     0.6
yiq_scan_time             52.6
yiq_phase_count           2
Nothing over the top, scanlines, very slight pincushion and some over saturation (remember to switch video to d3d to enable hlsl)
info on GM + VGA monitor here 
http://forum.arcadecontrols.com/index.php?topic=112869.0pics to follow...