That blue screen, could that be an overlay printed on the screen by the monitor itself. Does it look in anyway as the Windows GUI-style?
SH3 doesn't support widescreen resolutions natively. It tries to set up a 4:3 resolution which your monitor likely finds non-optimal.
Your options are to:
1: Set windows background resolution to 1024x768. (But this messes up your desktop icons and makes normal Windows look ugly and coarse.
or
2: Find an option in the graphics driver setting that scales the output resolition to your maximum/optimal monitor resolution. You have G-force, so Nvidia Control Panel would be what you are looking for. Right click on the desktop. Select Nvidia Control Panel. In the menu on the left select "Display/Adjust Desktop Size and Position". You may want to scale with maintaining aspect ratio, or squares will look like rectangles and circles as ellipses. What you should be getting are black bands on the side of the screen.
3: Implement the/a widescreen mod to SH3. I have no experience so I can't advise further beyond this point.
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