I tried on a different windows xp pc at work, and it works great.
I then installed the virtual xp environment from microsoft for windows 7, but it did not work

same error.
EDIT:
The log says just before the error:
"Pixel format not accelerated"
Googling on this error gives hints about opengl most likely not being found. Now this is a probable assumption as I had anothe project failing due to malfunctioning opengl. Perhaps certain chipsets do not run opengl well, but since piete's chipset handles it like a dream...... hm....
EDIT again:
Okay got it working

.
Shamefully to say it was my outdated driver. I kept installing the latest one my notebook manufacturer offered, but it is not the latest (it wasn't even for windows7). Went to intel's download centre, searched for chipset 965 for win7, downloaded and installed the driver (which states: media accelerator. Comes awkwardly close to the error message in the log), restart and done.
You can download the driver here:
http://downloadcenter.intel.com/When installing it will mess with your screen a bit, changes resolution and turns black, just let it go and it'll be fine

.
Now. Playtime!
Regards,
Joozey