having distorted image in VGA with FPGA board
Yes, it's because you are using the "silicon" oscillator.

The basys2 board also provides a socket for a crystal oscillator.
If you plug in a crystal oscillator and use its clock signal the jitter is gone and the VGA image will be fine. I have tried it myself.

BTW: The manual tells you about that:


  The primary silicon oscillator is flexible and
  inexpensive, but it lacks the frequency stability of
  a crystal oscillator. Some circuits that drive a
  VGA monitor may realize a slight improvement in
  image stability by using a crystal oscillator
  installed in the IC6 socket. For these applications,
  a 25MHz (or 50MHz) crystal oscillator, available
  from any catalog distributor, is recommended


("may realize a slight improvement" is a strong understatement)

See page 3 in the Basys2 manual.