Hi, wagnerpryde -
Welcome to Apple's Discussions.
Although many OS 9 programs will run okay in Classic under OSX, not all will - some won't run at all. In particular, if the OS 9 program requires direct access to the machine's hardware (such as to the video), it won't fare well in Classic The reason - OSX retains control of the hardware when Classic is running, and won't release that control to a request from a program written for OS 9.
Unfortunately games are often in this last group, the ones that won't run well or at all.
Although I've not tried X-Wing, I suspect that is the reason for the absence of usable video.
Another possibiity is that the game requires a much lower color depth than that which you are using. OS 9 can respond to such calls from a program, but OSX may not. If you haven't done so, before running the game try setting the color depth to 256 colors (if possible) or at least to thousands. If you know the screen resolution the game will want to use (such as perhaps 800x600), try also setting the monitor to that before launching the game.