Go to the Ironworks W&W forum, there you will find the hex code of the gameopt file. You'll have to edit it yourself, but it is only 96 bytes.
It is the correct solution for your error code, I had exactly the same problem.
The game starts now, I can create a party and leave the city. Once outside, I can't enter the city again because the targeting doesn't work. The mouse pointer simply doesn't recognize gates, items, monsters. This is very probably a problem caused by newer Nvidia graphic cards and I have found no way to fix this.
On my older PC the game now runs perfectly under XP.
One more hint: if the game crashes when opening chests, try different settings for the compatibility mode. I didn't believe it, but it actually seems to work.