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I am having issues in .dot hack gu vol 1 where when I turn the resolution scale on anything above normal native it causes characters and environment objects have weird shadows. They are not exactly shadows. Its like I am seeing multiples of of the character or object which each clone getting lighter.

Had that problem for a long time too, i ended up playing at native resolution, if anyone knows how to fix this they will do us a great favor

Try the half offset hack

Or maybe skipdraw (1..10) to potentially completely remove that and other effect. Buf half pixel offset is a better starting point.

I have tried both the half pixel offset and the skipdraw (0-100 1 by 1) and a combination of both to no avail, also played around a lot in the plugin settings but the only fix found is to leave native resolution.

P.S.: Tried to change even renderer from OGL to DX9 and 11, same thing

You can't remove it but you can make it less visible by using OpenGL and playing with the TC Offset X and Y

Without using custom resolution (can still use all the native increments such as 2x,4x,6x,8x) and without any kind of hack i managed to get the ghosting away, for some reason i had to totally close the emulator and reopen it to see the effect, changing the settings while having the emulator paused wasn't enough (cannot confirm with savestates, i reloaded the game from memory card)

Why does your plugin settings window look so different from mine?

Because he is using newer version(beta)not the plugins that came with pcsx2 1.2.1
http://buildbot.orphis.net/pcsx2/

A new version is due soon, please wait a couple of days.

By the way, the new openGL renderer can emulate better a couple of depth effect (shadows) for this game.