i've been playing this game myself, recently. i'm using peops as well, and the only difference between our settings is that i have dither mode turned off and playing in windowed mode.
i've gotten far in the game, so it does work. one thing i did notice is that in both Kasugayama and Seventh High Schools, the game will occasionally crash when loading up a battle. since you've only fought a few battles, i'll assume your still in Seventh High. i've gotten around the crashes simply by loading my most recent save state (and i imagine loading from memory card would work as well) after rebooting epsxe. give that a go. if no luck, you can try using gameshark codes to disable random battles or something, just until you get out.
i've gotten far in the game, so it does work. one thing i did notice is that in both Kasugayama and Seventh High Schools, the game will occasionally crash when loading up a battle. since you've only fought a few battles, i'll assume your still in Seventh High. i've gotten around the crashes simply by loading my most recent save state (and i imagine loading from memory card would work as well) after rebooting epsxe. give that a go. if no luck, you can try using gameshark codes to disable random battles or something, just until you get out.