I've been trying to get Dangerous Waters to install and work right under Windows 7 64-bit Home Premium for a long time. I finally hit on the right combo.
This applies to the Strategy First edition, v1.04 from the disc, no need to patch. As for other editions, I don't know.
I'm running an AMD Phenom II 1099T 6-core with an ATI Radeon 5870 and 8 GB of DDR3 RAM in case anyone is wondering about my system.
Right click on "setupDangerousWaters.exe".
Select "Properties" then go the "Compatibility" tab.
Select "Run this program in Compatibility Mode for: Windows XP (Service Pack 2)"
Put a tick in "Disable Visual Themes", "Disable Desktop Composition", and "Run this program as an administrator".
Click "Apply" and exit "Properties" dialog.
Double click the "setupDangerousWaters.exe". Follow onscreen commands to install. DO NOT install to "Program Files (X86)" folder. Create a folder on your main hard drive such as "Games", i.e. install to "C:\Games\Strategy First\Dangerous Waters" or something like that.
Go to your video card setup utility. Set antialiasing to "Supersample". If you do not, and you let it run in any form of "Multisample", you'll have graphics problems.
Alternatively, tick "Use application settings", but you won't have antialiasing.
And now for the CRITICAL STEP: YOU MUST RUN THE GAME FROM THE "LaunchDW.exe" executable the first time or you will have errors when you try to run the game! DO NOT launch the game with the desktop icon the first time! Instead, do this:
Go to the game's main directory. Locate the file "LaunchDW.exe". Right click it, go to "Properties", then put a tick mark in "Run this program in Compatibility Mode for: Windows XP (Service Pack 3). Now put a tick mark in "Run this program as an administrator". I know, it's not the same thing we used for the "setupDangerousWaters.exe" but don't blame me, I'm just reporting what worked.
Double click "LaunchDW.exe". Click "Play" on the dialog box that comes up. Put your name in the "New Player" box. Now click on "Options".
The game will minimize and the Speech Recognition setup dialog will come up. Don't close it, just ignore it for now. Go to your task bar and click on the Dangerous Waters icon to bring the minimized game back up on screen.
Set your options as you like. Exit the game. Kill the Speech Recognition dialog unless you want to set up speech recognition.
Now, edit the desktop icon. Right click it, go to "Properties", and make sure that "Target" is set to ""C:\Games\Strategy First\Dangerous Waters\dangerouswaters.exe" or wherever you installed the game.
Edit the "Start in:" box so it reads "C:\Games\Strategy First\Dangerous Waters". Click "Apply" and exit the "Properties" dialog.
Set "Compatibility" settings for desktop icon to "Run this program in "Run this program in Compatibility Mode for: Windows XP (Service Pack 2)". Put a tick in "Disable Visual Themes", "Disable Desktop Composition", and "Run this program as an administrator". Click "Apply" and exit "Properties" dialog.
Launch the game with the desktop icon. Go into options again and make sure all your options are set as you want. Make sure that your name is still in the "New Player" dialog and if not, enter it. When that is all done, exit the game.
Restart your machine and you should be good to go. You can hopefully now play Dangerous Waters from the desktop icon with no problems. It worked for me.
Now, if someone who knows what they're doing would make us a .dll with the Windows Application Compatibility Tool Kit for Windows 7 so that we could run the game at 1920x1080, life would be dang near perfect!