However, I still suspect that the problem lies with the video driver or something related. The driver for the Radeon ATI 1xxx series of graphics cards only partially supports the additional features of Windows 7. Is this driver installed? ATI Catalyst 10.2 (02/24/2010).
Another option is to check the compatibility properties of the game's shortcut and enable the following options: disable visual themes, disable desktop composition, and disable display scaling.