DubGuru: I've figured it out! This isn't a fix GOG support has given me, but I tried experimenting myself.
The Issue is Screen Resolution!!
Since it is an old game, it doesn't run well on high resolutions. Here is my solution (Windows 8.1)::

1. Right Click on your desktop :: Select 'Screen resolution'
2. On the window, there will be a blue text link to a new window that says 'Advanced settings'
3. Click that link, and on the new window that pops up, stay on the 'Adapter' Tab, at the bottom there is a button that says "List All Modes"
4. Police Quest: Swat 2 will run well, and wont be too magnified (although it is pretty squished) on this setting::

800 by 600, True Color (32bit), (60 Hertz)

Do that and although its not perfect, that makes it actually playable. I have an open Ticket with support at the moment and will post here if there is an easier solution.
I've attached a picture so you all can see the simple steps it takes to change your resolution. Follow these steps and go back to the (Recommended) resolution after you're done playing the game to go back to normal!

*Also, don't change the color settings posted previously in this thread, this only leads to it lagging even more or you wont be able to see anything during gameplay. If you've changed any of the Compatibility settings, change them back. You only need to change Resolution. To access this setting to make sure normal options are set, follow these steps::

1. Right click the shortcut to the game. (If no shortcut, right click the SWAT Application in its file location folder)
2. Select 'Properties' in the drop down menu, should be the last option
3. Go to the Compatibility Tab
4. *Make sure the 'Reduced Color Mode' box is un-checked*
(The option 'Run this program in compatibility mode for:' can be checked, and you can set it to your current version of windows. This option didn't seem to have any effect on gameplay.)

Good Luck and have fun! I love this old game!