After a lucky coincidence now I'm able to play D2.
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I never installed AMDDCO and never had to install it for other games, so I think this could be put in first aid or something similar. Maybe it could help someone having my similar issue...
Ya I was actually installing the AMD DCO when I found this today hope it does the same on my gtx 285 sc, that keeps jumping between 2D clock speeds and 3D. My dual boot Win7 and XP-SP3 has no problems on XP but this problem is on Win7.
Hopefully it works...though I find it funny that dual core optimization is not built into game since dual core is recommended, AMD dual core even. I'm thinking it's something else and the optimizer might mask it.