bumping a (very) old and as of yet unreplied thread may not the most effective means of getting a solution, but so far, only the OP has come close to an accurate description of this problem.
I have recently saved a copy of Psychonauts from the discount bin and installed it as soon as i got home. However, when i start the game, i get a black screen with an hourglass cursor. Then the trouble starts: i can hear sound as (i assume) the Double Fine Productions logo and the intro are played and eventually the game starts, but i can only see the black screen...
I have downloaded the most recent patch i could find, updated all my drivers and have dug through as many forums and support sites as i could find, but as of yet, a solution is lacking.