I'm bumping this thread. I suspect that there's a bad rom dump of SDM E-20 (from the ESS board). It's a 2708 eprom, and removing it makes the 'blue screen' issue go away.
Is there anyone out there with a known working Space Demon board set that can loan out the rom chip from their ESS board to see if the rom contents match what's been used in the MAME files?