Why not use the latest Dolphin ?
Do you have the same problem with the original melee ?
The Gyazo that I showed was from Melee, but I have a few friends that use 4.0-7840 and they don't have the same problem as I do and they have no clue, I saw one thread on reddit that fixed it for someone, and they just were running it through a steam overlay, which I am not doing.
Sound like a driver issue . Updating your GPU driver may fix this or just use a different backend (DX11 , DX12 , OpenGL)
Anyway , Dolphin forum does not support old build , you should use the latest 5.0 or latest development version
This does indeed seem like an overlay or driver issue.