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Hello all and thank you in advance for any words of advice. I just recently started using pcsx2 and i didnt realize how complex an emulator it actually is! A few hours of patient reading and i figured out how to configure it correctly for the most part. I got shadow hearts to work relatively well (between 40-50 frames most battles and 35-40 average on most walking areas) but i suddenly hit a snag today while playing it.

I am at the part where Yuri and the gang take the Smugglers Boat out to shanghai and are stopped by Li Li part of the way there. I have it saved at the point where you are told to help Sea Mama to a place she can rest, allowing you then to save and what not before you head on out to take care of some monsters. My problem is that when i head up the stairs out of that room, the screen starts is transitory screen thing then all of a sudden a message pops up saying the program has encountered a problem:

Problem Event Name: APPCRASH
Application Name: pcsx2 0.9.6.exe
Application Version: 0.0.0.0
Application Timestamp: 49a77286
Fault Module Name: d3d10core.dll
Fault Module Version: 6.0.6001.18000
Fault Module Timestamp: 4791a65a
Exception Code: c0000005
Exception Offset: 00025ab3
OS Version: 6.0.6002.2.2.0.768.2
Locale ID: 1033
Additional Information 1: fd00
Additional Information 2: ea6f5fe8924aaa756324d57f87834160
Additional Information 3: fd00
Additional Information 4: ea6f5fe8924aaa756324d57f87834160

Ive tried a few things but cant seem to identify the problem still. Is there something wrong with the game or the program? Makes me sad, i was just getting into it again

Looks like a GSdx crash. You never posted your plugins used or your settings so not many suggestions to make.
You should use the latest 1888 beta with the 30 December plugin pack for better compatibility and speed in any case. Also try changing GSdx to DX10 Software renderer or even DX9