OK folks, here it comes:
I think this entire issue has to do with Desktop vs. Laptop. I haven't seen anybody here talking about that. I just downloaded the game today on my desktop, Windows 7 Professional, i7 4.3 ghz, AMD 7950, etc.
Now, once it installed I just clicked on the desktop shortcut and it worked perfectly. No changes at all.
So I played it for a couple hours and had to go upstairs. I figured I'd install it on the laptop so I could goof off with it a bit while I did some things upstairs.
Had every problem listed on this thread.
It has to have something to do with the mobility graphics chips vs. actual aftermarket video cards. After trying a bunch of the things listed in this thread, this is the ONLY thing that worked:
Change graphic settings to 16 bit, 800 x 600.
Open properties on shortcut, compatibility mode, check them all.
Runs perfectly, no issues, no lock up of mouse, nothing. I just think that onboard laptop video doesn't have enough smarts to do the conversions automatically, so it screws everything up.
My two cents folks. Take it for what it's worth.