I remember seeing this game in arcades a lot of time back then and I don't rememeber the red color too, but now I'm doubting about those memories!
As far as the SFIII glitch goes, again, I don't remember it when I played the game on arcades, but I know that our unreliable brain is not enough for the MAME team The ports of the game doesn't have the glitch, and this reconstructions with the game graphics show it as I remember.
Anyway, I don't have any real hardware video to confirm, or a cabinet near my home to go to see it, so we might have to wait for confirmation to someone who owns the arcade PCB.