I'm in a similar boat. I've got both the GOG & Steam vesions (running windows 10). First off GOG:
install the game and run it (the resolution is 800x600 out of the box). runs fine.
install 1.0 project hd and run the launcher. first off the launcher will only allow me to run at 1280x720 (despite my 1920x1080 desktop res).
OK, roll with it, and it opens a windowed application that is immediately unresponsive so I have no choice but to quit the app through task manager.
steam:
install and runs the vanilla game just fine.
install the hd project and the app crashes in windowed mode (similar to GOG version). this is the case for both the base folder and install the mod to the LEGACY folder.
have double checked and directplay box is ticked in windows features. Tried 3 different laptops (windows 10, windows 11 and ubuntu using steam proton). cannot get this to run