When I alt-tab and then click back on the game the display becomes half-sized and a purplish pink color (the other half is just plain black). Clicking in the black area can activate things in the game but it is unplayable and I must restart.

I have fooled around with the compatibility settings for mm7.exe and no luck.

It always happens to me. I save and then re-load. Saving is tricky. The mouse arrow is about 1/2-screen away from where it is suppose to be. So move the mouse around until you start seeing the game bars light up as if the mouse arrow is moving across them. It does take some practice (at least for me). It then reloads in normal screen.
The only way I could solve the problem.

Thanks for the reply. I wasn't very clear with my issue, I am able to save and exit the game and it will restart normally. I am looking to solve the screen issue where I don't need to do that though.

Sorry for my mistake. Never found a solution to the screen and colors re-aligning except for re-loading.

I had this problem until I applied the latest Greyface patch, which allows manual resizing of the screen and to move the cursor off the game without needing to Alt+Tab.

I had this issue in M&M6. I just re-alt-tabbed again and it fixed itself. I would try it a few times to see if it automatically fixes itself.

I installed the patch to the folder with the game folders, and it worked the first time. Updated UI is great, and quicksave too. However, the next time I started the game the patch was no longer applied and the game was running the same as before I installed the patch. What do I need to do?

Are you using Galaxy? I think it tries to automatically "repair" games. You can disable auto-update. Or just don't use Galaxy and just use standalone installers.