Coincidentally, I just installed my Millenium Edition today and wanted to play MM7. It looks like it's a Direct X problem. When I ran through the installer, it checked my system requirements and for Direct X it listed 6 as the required version. Under the "what I have column" it just said Direct X and Failed in red. I'm running 9.0b, so I'm guessing that MM7 is old enough that it's not recognizing 9.0b as a compatible version. You mentioned that you went back to 8.1, so I guess if you're comfortable going way back to 6, you would be fine. I think we probably both have the horsepower to run it otherwise though:
My machine:
Asus A7N8X Deluxe
Athlon XP 2500+
GeForce FX 5200 128Mb
512 Mb Kingston RAM
Windows XP Pro SP1
Direct X 9.0b
