It depends on your definition of "correctly", but the IIgs does not
display any of the 8 bit graphics modes exactly like a //e does.
For DHGR, the difference is that the 4 bit sliding window used to decode
NTSC colors has some additional circuitry to detect when the content of
the window is changing. When this situation occurs, the previous pixel's
color is repeated until the value of the window stabilizes.
How does it look? Well, it's hard to see since there are still
artifacts -- just different ones. Look for transitions in color from
left to right on the screen. You'll see that the first color stretches a
little farther right than expected, possibly covering up some fringe
colors that a //e would have produced.
You'll have to use a real IIgs to see it as no emulator I know of
accurately reproduces this behavior.
-- Daniel