I just ran into this myself with TC 7.2 on my Chromebox!
Even though I didn't need graphics-<kernel> since I'm running xvesa, I did it anyway, and ended up EXACTLY like you did.
Since you need graphics loaded to get your audio working, I have a solution that I discovered:
Add this to your kernel cheatcode at boot, or permanently into your extlinux.conf at the end of the APPEND line:
nomodeset
Apparently, due to KMS, various cards will boot to max resolution when graphics-<kernel> is loaded. Usually reserved for xorg like Rich points out. But when WE do it, typically using Xvesa, blammo - funky screen. Mine was exactly like yours.
So my recommendation is to boot without graphics in your onboot.lst, make the edit to extlinux.conf to add nomodeset, add graphics back (use the APP or manually put it in there) and reboot.
But this is just because even though running xvesa, you need it to get audio working right.
What I *suspect* is this: Since graphics-<kernel> is a dependency of the I2C tcz, it might be that to get audio working is to load only the i2C tcz itself and give it a try. Obviously, since you aren't loading graphics, you won't need the -nomodeset- cheat code.
The guys who are more into hardware than I can comment about only loading the i2C extension by itself instead of the sledgehammer approach of using graphics for a non-xorg setup.
Thanks for bringing this up!