This is a problem of winmm. An updated version is linked in the X-Wing and TIE-Fighter Series forum.
Just unzip the dll's, rename winmm.dll to win.dll and copy them to the game directory.
You also should install nGlide 1.04 from Zeus Software and delete the old version from the game directory (3DFxSpl.dll, 3DFxSpl2.dll, 3DfxSpl3.dll, glide.dll, glide2.dll, glide3.dll, SST1INIT.DLL)
Without the new version Pandemonium! will crash when you try to exit it.
Thank you so so much for posting this! I will certainly need to try this out! I miss this game so much and I was so disappointed when the game wasn't running on Windows 10.