What you are describing is what happens when a program starts using more memory than it's supposed to (and still isn't enough to satisfy it). There is literally not enough RAM left to draw the windows or your desktop pic (if you've got one).

See the thread on memory issues for more discussion. Frankly this is pathetic ... from everyone's experiences it seems the new version won't run smoothly unless it's assigned about 100MB RAM. Good thing there is a Mac version of Morpheus on the way.