Yes, could be the settings, but considering the changes you made to the system, wetwarev7's suggestion could be good.
To have the game run on 1 core, start it up and let it get to the main menu. Ctr-alt-del to bring up the task-manager, right-click on "sh4.exe" under the "processes" tab and select "set affinity...". You should see a dialog where you can select the cores the process should run on. Disable all but 1, see if that does it.
It runs fine on dual-core for me, but it might have trouble with more.
