Sadly my screen died while testing, I can't tell you right now if the square flickers.
I have indeed a Super CD-ROM² compatible system (that I have to repair too), but no Arcade Card
Edit : tried on a regular OG White PC Engine with an HDMI adapter, the red square does flicker a bit at the top when the screen scrolls while I follow it. It doesn't when my character is static.
Grass or water effect is perfect