I was messing with two different Model 2 Genesis consoles with 2 different 32X modules and got he same results. My video is too bright, too red, and has a lot of ghosting when I use my 32X module and play SF II through it. I took some pics and attached them.
Note the blurry text and red hue when playing through 32X!
BTW, this is on a 1080p LCD through composite and I don't know which video encoder chips I have in these consoles yet. One is a 3/4 motherboard Model 2 and the other is a full size mobo Model 2.
I haven't tried this on my Model 1 consoles yet, but I was really surprised to see this. Is this to be expected? If so, I need to pull out my module when playing Genesis games or look for another solution (external s-video).