are you referring to the mod of D1 for NWN, called "Lord of Terror"?
i have it running with no problems, and am running version 1.06.
if that's not what you are referring to, then please elaborate as to how you installed Diablo1, where you installed it and what happens when you attempt to execute it.
i have winxp, sp2, all essential windows updates, fairly new drivers for vid & sound card and don't need to use compatibility mode. the version of diablo1 i'm running is v1.09.
V***V