I love this game. I loved Ultima Underworld and really wanted to replay - but it is one of those cases where it is just a bit too far back to play.
I have tried every conceivable thing. I thought that because the widescreen and high resolution options were added in the latest patch (I think), I switched from 1680x1050 to 1024x768. Nope.
I changed the mouse sensitivity to NONE in the game. Nope.
I changed the mouse sensitivity to very slow in Windows. Nope.
I've tried drawing extremely slow, fast. I've lined up the cursor on a straight line in the game (Like a brick) and made it work.... very, very rarely.
I've googled every forum out there - many so dead that there are only spam posts for the past few years. Nothing.
I have found a bug. If you set a high resolution or widescreen mode, when you restart the game the overlay graphics are all HUGE and when you try to draw the runes you can barely even tell where the cursor is... doubt anyone fixes bugs anymore but it is 100% repeatable. Resetting resolution in the game corrects it.
I really, really want to play this game. There has been an RPG drought IMHO for so long. I love 1st person. I love the simple gameplay mechanics. At this point I wish I could turn on "arcade mode" for spells like the XBOX version has...
Really sorry you are having so much trouble getting runes to work. Did you try drawing them smaller as I suggested? I am using a 20" monitor (old CRT that still works great) and I'm running it at 1600x1200. Of course, this is a non-wide screen capable monitor. Sometimes I make my runes as small as 1.25" or 1.5". That's pretty small for a 20". Are you using a mouse pad (with the cloth top they first came out with)? Reason I ask is that I installed this on my wife's computer also and she never uses a mouse pad. I found that trying to draw a straight line on a slick desktop was nearly impossible. I know it's a long shot, but I just thought I'd ask if this was the case...
One more thing - I am running patch 1.18 with no problems (the original game disc). I didn't buy the game here (with 1.19). I doubt if that would make a difference, Though. Good Luck.
NOTE: If all this fails, have you played Gothic 2 with the expansion? Available here at GOG. It's 3rd person, but that never bothered me. Not with this game. Greatest RPG ever (IMHO). Gothic 1 is also great (the controls for both are a little hard to get used to at first, but when you do they become second nature and to me it makes it feel more like you're really in a battle. Just thought I'd point this out. But, if you're a real RPG fan then you probably have already played these 2.