According to Google, there are people who have played it in Windows 7, and the fact that you can get it playing in safe mode means that it should work. There must be something that loads in normal mode on your computer, which doesn't load in safe mode, and that something is preventing the game from running.
Could there be an antivirus blocking it?
Have you installed it in a location that Windows 7 considers "protected," like in C:\Program Files (which is probably the default install location, as it is for most Win98 games)?
If so, have you tried installing it in your User's Documents folder instead?
Have you tried running it as an Administrator? (right-click the game shortcut, change compatibility to XP, 98, or 2000, and check the boxes to disable visual themes and desktop composition before starting the game)
What does it do when you try to run it in normal mode? Does it give any message?