Hello. I understand that this is an old thread but I have been trying to find a solution to this problem and a couple of more that I had to face when I upgraded my Windows from 7 to 10. 7 were flawless in playing this great game but unfortunately 10 presented some graphic bugs. I think the problem lies within the OS, specifically how it handles lower DirectX needs. Mind you, I also read that DirectX 9 is problematic in its implementation and that several processes that mess with graphics options (or just monitoring) produce problems when using it. All in all, compatibility with older games is officially pushed out of the window (pun intended) steadily. I found this, however and it fixed almost everything:
http://www.vogons.org/viewtopic.php?f=9&t=34931 It is a wrapper for old graphics APIs, named dgVoodoo. It is quite recent and, surprisingly, works just fine :-) The readme explains all and it's quite simple too.
Last but not least, if you decide not to use this but try things out yourself, you may need this:
http://www.oldversion.com/windows/directx/ It's an archive containing every DirectX from 1 to final 9.
Have fun, everybody and let me know how it goes if you try it out ;-)