Demo? Are we talking about the 1.10 or the 2.0 version?
2MB VRAM is _very_ probably not enough for 2.0, as the tilesets alone take about 12MB in VRAM.
This could perhaps be improved if the textures were S3TC compressed, but that wouldn't work on older cards anymore (because older (pre GeForce/Radeon) hardware doesn't support that feature). (Won't work on most DRI (opensource) Linux drivers, either.)
And yes, WinXP is not very good for a machine with that specs. Stay with Win9x, that's better. (I just heard there are ppl who got WinXP to run on a 386 machine with a lot of patches and hacks.
It needed about an hour to show the start menu after you clicked the icon.
)
WZ will run on Win9x, I think. (At least I think someone reported it does.) Even the install of the MSVC redist is easier, because you need less additional crap (SP2 or MSI3).
I'll try to improve future Windows support by compiling it on Linux.
(Not a joke. Crosscompilation on Linux is much easier for me than working around that MSVC dependencies.)