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I have recently installed PCSX2 0.9.8 on my machine.
Here are my Specs:
Operating System: Windows 7 64-bit
DirectX Version: 10.1
Physical Memory: 8099 MB
Minimum Graphics Memory: 64 MB
Maximum Graphics Memory: 1696 MB
Processor: Intel64 Family 6 Model 42 Stepping 7 [i3]
Processor Speed: 2095 MHz
Processor Graphics in Use: Intel® HD Graphics 3000
Video BIOS: 2098.0

I have configured PCSX2 with mostly the recommended settings

I began with the game Just Cause which started okay with nothing wrong but as soon as game play started, I got a bunch of distorted colors along the bottom of the window. I tried changing the GS settings but nothing seemed to help.

Is there anyone who might know a solution to this problem?

Here are some screen shots in the attachments

tried software mode ? (F9 Key)

(06-06-2012, 09:02 PM)jesalvein Wrote: [ -> ]tried software mode ? (F9 Key)

That is in software mode

this is what it looks like in hardware mode

PCSX2 0.9.8 is quiet old.
Use one of the latest SVN's and then report back if issues are found to be persistent.
Here's the link:
http://pcsx2.net/download/development/svn.html

Also most of this stuff can be fixed with Skipdraw.

Go to the video plugin options, enable HW hacks and there is a button there. Click it and you'll find one option called "Skipdraw" write any number such as 5, 10 and etc to see if it works.

But yes try the latest svn.