Did you go through the graphics options in-game? Maybe changing the image quality setting will help.
If you run dxdiag (click Start | Run, type in dxdiag and hit Enter), does it report any problems? There are a couple of tests under the Display tab.
You could try lowering your graphics hardware acceleration. In Windows 9x that is in the System Control Panel applet, Performance tab, and after hitting the Graphics button. IIRC it is similar in XP.
I assume you already checked for newer drivers and Windows updates?
Some people, though more so with laptops, have found the third party optimized
Omega Drivers (for ATI or nVidia chipsets) better for gaming.
The Alphabit option also shows up as unchecked when I save, and then re-start the configuration tool. Maybe just a cosmetic problem? The files config.div, slashed.cfg and slashed-d3d6.cfg (in the '
..\Divine Divinity\Run\' folder) were updated when I saved. The first is the only text based file, but doesn't contain an 'Alphabit' term.