It maybe a monitor, And Lu, you have mentioned there is some program which controls monitor settings. Try to disable it.
Try changing refresh rate of the monitor as Cleglaw explained. When you start the game, is monitor refreshing? Can you see some frequencies changing (it is shown on monitor after you start the game).
I have 100Hz Hitachi. I had a problem when after starting a game monitor went into 144Hz. In refresh rate there is optimal, default and custom refresh rate. Usually it is recommended to put optimal, but you can make it custom, but keep in mind you will have to do this with every resolution on 16 and 32 bit separately.
Cleglaw is making good point about terminating some processes in your machine.
One tiny program running in background may have caused so much trouble.
If ending processes through ctrl-alt-del doesn't help do the following:
start -> run -> type msconfig. Start from startup. Look into programs it loads with startup. If you can't say what is it by looking at it's name, look into command line and path. Note, here you are not deleting anything. Just letting to load or not, so if you see some problems just go there again and activate the program.
As for CD-Rom DVD-rom. Have you tried from each drive? If it doesn.t work with cd-rom maybe dvd-rom is the option?
But you say it starts to play the cd in the manner it always does, right?
What I mean is if there is problem reading CD it will kinda stuck reading it, it will attempt to read again and again with repeating sound.
BTW if you go start-> programs-> NWN folder
can you launch NWN in safe mode? Some games have this option some have not.
Do you have configure or something like that? If yes, you can configure display, audio etc settings from there.
And one more thing.
There is small utility with the name hmm is it syslog or something. It is very small, you can try to search - system monitor in internet search.
This utility is monitoring system for any errors occuring in it. So, it may help you to track down the problem you have. Damn, I do not remember it's name.
Try this out. Let us know how will it go.