I've had similar problems, and have the same version of windows. When I change the target to the one suggested, I can get the configuration panel up, but then I get the error that rundll32 has stopped working.
I've had no problem running the game with the associated patches etc, but I get to a certain point in the game and it asks me to turn over the dvd, and I cannot get beyond this as I'm running the game from an .iso.
Is there anyway around this?