I have been beating my head against my desk for 2 hours trying to figure out why the heck my images suffered from distortion while using the "setPanelImage" command in BlueGUI 2. Well, the panel I was using I had aligned to "All", so that it took up the whole window it was nested in. It turns out that if you align the panel to "All" (resulting in the line: setGadgetAlign panel_handle, 1) the image will distort... at least it did in every instance I tested this.
Even if I used the correct texture flag, ie: LOAD IMAGE Filename, 1, 1
So, rather than align the panel, just set the top and left positional settings to 0, and set the size of the panel to match the size of the window. It works the same way, and will not distort the image.
I noticed a couple of people may have had the same issue (in this context) but the threads were locked due to inactivity, so I thought I would throw this here for the next person who does a search.
Yay! My first "helpful" post!