The game checks if D3DDEVCAPS_HWTRANSFORMANDLIGHT flag is set in the device enumeration callback. If it is the case, the games fails saying there is no D3D device found. After all the enumeration, it checks the DRAWPRIMITIVE2EX flag. It it is not set it fails saying that the device is not DX7 compliant.
Hmmmm, maybe that in real Windows, there is always at least one driver which is enumarated which does not support HW transform and lighting... I would not know the usefullness of this, but well, this may be an answer to the problem.
Lionel