When you switch on blended image - game starts to use HWL files - they were developed in MM7. So I think it is more latest version that can ignore some critical mistakes of the game.
It just a guess, I'm not sure about it. But about 9 years ago I had the same idea of switching video settings on my "pirate" MM7 game versions - that was full of bugs

When I had original licence game - there were less bugs and game works stable in any video settings

By the way, I added 1st female NPC! Wait an hour for the screens =)