Errr, one thing I had to do with an old game called Fallout and Fallout 2 back when I had a Win2K system was to do the msconfig, Startup tab, (remember current settings), disable all, restart then see if it runs. If it runs, then there's a process causing conflict.
Have it to Run in compatibility mode for a lower Win? <--Don't know about that one, since Psy seems like an XP-only game.
Make sure it installs and runs fine on another system (friends, family, coworkers...).
This one here is essentially your last resort and I wouldn't use it unless other programs aren't running properly: Clean install of Windows.