Okay - Launchbox doesn't work but going through MAME actually did something!
I went to "START EMPTY", and got to the PHILIPS CDI screen.
I hit TAB, Select Files, and chose my CHD for ZELDA
It loaded, the opening animation played, opening map showed, but when I get to the play screen - it starts stuttering and stays like this:
Zombie Dinos crashes after the opening cutscene like yours did, and Link also stutters when starting the first map. But at least we're getting somewhere!!
This is one of the warnings that popped up though:
I have not seen the warning about not being correctly dumped. Is this a GAME.CHD issue, or BIOS issue?