I'm having the exact same problem!

Since it appears to be a video issue, I've tried turning on and off about all the video settings I can, but to no avail.

I've run this game on three other computers and not had a problem.


debug.err follows:

Debug Message: Version v1.4x last updated on: Mon Oct 23 17:43:56 2006
Debug Message: GalCiv2 is activated.
Debug Message: Checking DX Version.
Debug Message: *********DXDiag info follows.*********
System Info
Time: 3/12/2007, 11:14:05
DirectX Version: DirectX 9.0c (4.09.0000.0904)
Machine Name: -----------
Operating System: Windows XP Professional (5.1, Build 2600) Service Pack 2 (2600.xpsp.060411-1541)
Languages: English (Regional Setting: English)
System Manufacturer: LENOVO
System Model: 2623D6U
BIOS: Phoenix FirstBIOS(tm) Notebook Pro Version 2.0 for ThinkPad
Processor: Genuine Intel(R) CPU T2400 @ 1.83GHz (2 CPUs)
Physical Memory: 1534MB RAM
Page File: 528MB used, 1622MB available
Windows Dir: C:\WINDOWS


Display Info
Display device 1:
Device Name: \\.\DISPLAY1
Card Name: ATI Mobility Radeon X1300
Manufacturer: ATI Technologies Inc.
Chip Type: ATI Mobility Radeon X1300 (0x7149)
DAC Type: Internal DAC(400MHz)
Key Device: Enum\PCI\VEN_1002&DEV_7149&SUBSYS_200517AA&REV_00
Display Memory: 512.0 MB
Current Display Mode: 1400 x 1050 (32 bit) (60Hz)
Monitor Name: ThinkPad Display 1400x1050
Monitor Max Resolution: 1400,1050
Driver Name: ati2dvag.dll
Driver Version: 6.14.0010.6635
Driver Date: 9/12/2006 16:50:08
DirectX Acceleration Enabled: Yes



Sound info
Sound device 1:
Description: SoundMAX HD Audio
Default Sound Playback: Yes
Default Voice Playback: Yes
Hardware ID: HDAUDIO\FUNC_01&VEN_11D4&DEV_1981&SUBSYS_17AA2025&REV_1002
Manufacturer ID: 65535
Product ID: 65535
Driver Name: ADIHdAud.sys
Provider: AnalogDevices
Driver Version: 5.10.0001.4326
Driver Date: 6/20/2006 09:56:48
Type: WDM
Other Drivers:
Acceleration Level: 3
Cap Flags: 0
Min/Max Sample Rate: 0, 0

Sound device 1:
Description: Bluetooth Audio
Default Sound Playback: No
Default Voice Playback: No
Hardware ID:
Manufacturer ID: 1
Product ID: 100
Driver Name: btaudio.sys
Provider:
Driver Version: 5.00.0001.2900
Driver Date: 5/31/2006 15:26:38
Type: WDM
Other Drivers:
Acceleration Level: 3
Cap Flags: 0
Min/Max Sample Rate: 0, 0

Sound device 1:
Description: Bluetooth High Quality Audio
Default Sound Playback: No
Default Voice Playback: No
Hardware ID:
Manufacturer ID: 1
Product ID: 100
Driver Name: btaudio.sys
Provider:
Driver Version: 5.00.0001.2900
Driver Date: 5/31/2006 15:26:38
Type: WDM
Other Drivers:
Acceleration Level: 3
Cap Flags: 0
Min/Max Sample Rate: 0, 0



Debug Message: *********END dxdiag info.*********
Debug Message: Entering WinMain
Debug Message: ******* Starting Game Shell *******
Debug Message: Going Fullscreen
Debug Message: Preparing to change display settings.
Debug Message: Using multilsample setting: D3DMULTISAMPLE_4_SAMPLES
Debug Message: Could not create the render device using default format. Switching to 16bit
Debug Message: Using multilsample setting: D3DMULTISAMPLE_NONE
Debug Message: Could not create the render device.
Debug Message: InitializeDirect3D Failed.
Debug Message: Now Fullscreen
Debug Message: Shell initialization complete
Debug Message: WM_CLOSE message received.
Debug Message: GameUninitialize start

Karl, try editing the prefs.ini file in My Documents\My Games\GalCiv2 and setting the DisplayWidth and DisplayHeight lines to your desktop resolution (1280 and 1024 respectively). If that does not solve it, also change the Fullscreen line to 0.