Hey guys,
I was having the same problem along with the smacker error and all sorts of other direct 3d initiation problems even when using software mode and 3d sound disabled. I could enter the game start creating my party but then the smacker thing happened. The thing that worked for me is setting the windows colors to 16 bit instead of 32. Viola all is solved. I also did downlaod the microsoft compatibility toolkit 3.0 but dun think i really needed that. gl.