It seems I've made MM7 work on my system (also WinXP with DirectX 9 installed), and I had the same problem with the game starting but then quitting again presently.
Taking a clue from this thread, I ran the setup again and this time disabled 3D sound. Lo and behold! Now the game starts up and runs! (I played for about 5 minutes on the contest island just to see it really worked)
Enjoy!