@iremakakca The world of Isla Paradiso has been broken since the pack was released, and the game can freeze or crash there on even the most powerful systems. It's not about RAM either, more the game engine falling all over itself trying to reroute stuck sims and the like. The workaround is to either play elsewhere or use a fixed version of IP like the one you can find here:
https://forums.thesims.com/en_US/discussion/811253/removing-ip-lag
You can also apply the listed fixes to your own save.
The issue with color blocks sounds like something within the game engine—a rendering function, clearly, I just don't know what the technical term would be—is failing. This is more likely to happen when the engine has too much to do, as would be the case on the festival grounds if there's a lot going on, including a relatively large number of sims. The fog that covers IP's hidden islands is also quite taxing: I've panned across the horizon and seen a 40% decrease in fps as the camera centers on one of the fog banks. So I'd guess that the rendering part of the game engine is just giving up.
As far as graphics options go, it seems that lighting and tree detail cause more problems than other settings; many people with integrated graphics need to put both of these on low. I don't necessarily think this is your issue, but if you see problems in Sunset Valley, it would be worth changing those settings.
P.S. Long answers are a good thing, that is if they have useful information, as yours does. It saves us both the time of all the extra replies needed to clarify the situation.