If you added the 'splotchproblem 1' line to the end of your config.lcl file, did you hit Enter afterwards? The game expects the last line to be blank, and ignores it.

The other workaround for this problem is to wait at least 45 minutes after booting into Windows to start the game.
FIX for splotch problem/weird color areas/fog

If you have the disk version of the game, did you try running the configuration program and selecting DirectDraw or Software as the rendering method?