I don't know what to suggest other than comparing the default settings for the unpatched game with with the default settings for the Fall of Seterrif expansion.
I guess it's also possible that the Fall of Seterrif expansion uses a different version of the PhysX drivers.
Support for this game is a mess. The support forum at Nordic Games
at
http://forum.nordicgames.at/forums/854-ArcaniA-Technical-Supportis full of links to the JoWood forum, which no longer exists because JoWood went bankrupt.
At least you were able to play the original game.
I can only wish you luck with the expansion.