Note: This is only for the CD Version, May not work on The DVD version:

A Little Work, But I have this game working on a brand new XP computer.

Put CD 1 in, Cancel the installation.
Explore your disc, change the program compatibility mode of the setup file to windows 95.

Also click on these boxes

Disable Visual Themes.
Turn off advanced text services.

get the game patches here

http://www.dcegames.com/support/int/support_patch.php3?id=6#0

and follow the directions on dreamcatcher's site.

The only flaw i have seen is characters can seem jittery. But this can be fixed by fiddling with your hardware and audio acceleration.