I had a similar issue, here's what I did:
1. Uninstall the game.
2. Insert Disc 1 and run the installer in XP compatibility mode and with Administrator privileges.
3. Follow the install procedure.
4. Update the game to the latest patch.
5. Download the mss32.dll file here
and replace the one in your TSL directory with it.
6. Run the game in XP compatibility mode and Administrator privileges.
It may also help to turn video and sound options down to a low/medium setting.