I have heard of this bug being reported before. That screen is in interlace mode which is the same as the character selection screen. On older versions of WinUAE it seemed to vanish but I cannot get rid of it on my latest version of WinUAE. Not that I am blaming it, I am trying to test Renegades Deluxe on my actual 1200 to see if the graphical bug is there too...if it is I have a real problem.
Thanks for bringing it to my attention.