I'd bet PowerSDL issue.. I think I had some fullscreen gfx errors in the past too, but haven't got them lately. Check your powersdl.library versions and try to reset its settings? It's an external library and MorphOS update/reinstall doesn't help with it.
Another option which comes in mind might be low gfx memory situation. If you have more vmem in use than earlier and it would cause some trashing for reason or other. Try to reduce its usage elsewhere and try games then.
