It sounds like the Shader Model 1.1 is the culprit. I do not have problems with my other games (Nibiru, Secret Files) and these games did not mention Shader Model.
The pixel shader support is not the issue. According to the information at the Intel link you gave us, your IGP has the necessary pixel shader support for this game. I believe the problem is that your integrated graphics processor doesn't have support for "Hardware Transform and Lighting" (T&L), or perhaps the drivers are in-compatible. Hardware T&L is only on 965 or later chipsets.
The ability to get up to date drivers is another problem that severely cripples a laptop's ability to play the newer games. You have to get your drivers from your laptop manufacturer's web-site, as they are almost always proprietary. The problem with that, is that laptop manufacturer's have very poor support for the video drivers. I wouldn't be at all surprised if the most recent video drivers they have for your model are the very same ones that came installed in it.
I think most laptop users will not be able to run Overclocked. If the trend is going for Shader Model, laptop users will not be able to play most adventure games.
Not at all. There are many laptops on the market that have pretty decent dedicated video cards in them, as opposed to an integrated graphics processor such as the one you have. Those laptops will play most any PC game just fine, regardless of the genre. However, they are still plagued with the lack of up to date driver support.
A good video card, and the drivers to support it are very important for PC gaming. Unless you just absolutely have to have the portability of a laptop for gaming, a desktop computer would be the much better way to go. It's very simple and in-expensive to upgrade the video card in a desktop, whereas it's usually not an option in a laptop. If you MUST have a laptop for gaming, then purchase a model with a good video card in it. We'll be happy to advise you on what to choose when the time comes.
Check your laptop manufacturer to see if there are any newer video drivers than what you're running. If your laptop manufacturer has no newer drivers, then perhaps try the video drivers from the Intel web-site. They may work, or they may not. If they're not compatible, then there's really nothing you can do that I know of.
If the lack of hardware T&L support is why you're getting the error message, then updating the drivers will not help you anyway.
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