From what i remember usually these are the settings that i change. The other options i would usually let the default:
Screen Ratio: For fully 3d games i use WideScreen. 2d games and pre-rendered i use stretch.
Screen Color Depth: 32 (better mdec)
Top/Bottom Black Bands: Remove top/bottom bands (image maybe wrong)
Video Renderer: Hardware + Shaders (For 2d and pre-rendered games). For fully 3d games i use OpenGL.
HW/Soft Threading Mode (Experimental): 2-Threads (faster in 2/4 cores)
GPU Shader: FXAA
Plugin Subpixel Precision: Enabled
DMA Chain Core: Enable always (slower+more accurate)
Sound Quality: Full sound effects (slow)
Sound Latency: Very Low
Other options like doubling resolution and the 2d filters would make every game that i tried unplayable. If anyone knows a better choice of options i would like to know it as well.
What are the best settings to make it look as close as possible to actual PS1 graphics?
I'd say if you wan't to have a good mix of stability, performance and accuracy
run tiagao_extremo's settings but instead of "hardware+shaders" use "hardware"(or shader NONE instead of FXAA) and set the aspect ratio to 4:3
You can use a software renderer to get more accuracy at the cost of a lot of optimizations and performance as it loses the ability to use the XD's GPU and puts a lot of workload onto the CPU.
So if you can run the game at 60fps in software you get the closest PS1 experience on that, If software emulation is slow (or crashes like it does for me) you can try overclocking the XD's CPU or use hardware without shaders and a 4:3 aspect ratio. ePSXe's hardware emulation comes very close the original PS1 graphics so I always use that setting.