As an extension of previous work on computer-generated phantoms, more accurate, realistic phantoms are generated by integrating image distortion and signal loss caused by susceptibility variations. With the addition of real motions and activations determined from actual functional MRI studies, these phantoms can be used by the fMRI community to assess with higher fidelity pre-processing algorithms such as motion correction, distortion correction and signal-loss compensation. These phantoms were validated by comparison to real echo-planar images. Specifically, studies have shown the effects of motion-distortion interactions on fMRI. We performed motion correction and activation analysis on these phantoms based on a block paradigm design using SPM2, and the results demonstrate that interactions between motion and distortion affect both motion correction and activation detection and thus represent a critical component of phantom generation.