Thanks for reporting it: it seems indeed an OAM priority problem. I'm going to investigate this, when I arrive to clean up OAM drawing (soon-ish, hopefully).
It might well be the same problem which affects TMNT Tournament Fighters...
Let's say that we are left with only a few priority problems compared to the old code (which was missing more important effects, like OPT and correct hires drawing, though)
on a different subject, I just finished to implement mouse support. Mario Paint has never worked in MESS, so I cannot use it to test the code, but Tetris & Dr. Mario correctly complains about it
and I was able to play Arkanoid with SNES mouse inputs, hence I think it should be mostly correct.