I don't know if my issue is the same, but my symptoms sure are.
Win7 x64, 8800GTX, latest drivers. Game's running as Admin. Running in compat mode doesn't help.
BTW, I'd appreciate it if you'd trim machinenames in logs; I've changed mine, below.
=============================
Debug Message: Version v2.03 Twilight of the Arnor last updated on: Thu Jul 23 11:47:38 2009
Debug Message: Could not open reg key HKEY_LOCAL_MACHINE SOFTWARE\Stardock\ComponentManager\Drengin.net\GalCiv2UL
Debug Message: Could not open reg key HKEY_LOCAL_MACHINE SOFTWARE\Stardock\ComponentManager\Drengin.net\GC2EU
Debug Message: Could not query reg key HKEY_LOCAL_MACHINE SOFTWARE\Stardock\ComponentManager\Drengin.net value named Serial No
Debug Message: Could not open reg key HKEY_LOCAL_MACHINE Software\Stardock\Drengin.net\GalCiv2UL
Debug Message: Could not open reg key HKEY_LOCAL_MACHINE Software\Stardock\Drengin.net\GC2EU
Debug Message: Could not open reg key HKEY_LOCAL_MACHINE Software\Stardock\Drengin.net\GalCiv2UL
Debug Message: Could not open reg key HKEY_LOCAL_MACHINE Software\Stardock\Drengin.net\GC2EU
Debug Message: Checking DX Version.
Debug Message: *********DXDiag info follows.*********
System Info
Time: 11/8/2009, 00:52:12
DirectX Version: DirectX 11
Machine Name: MACHINE
Operating System: Windows 7 Ultimate 64-bit (6.1, Build 7600) (7600.win7_rtm.090713-1255)
Languages: English (Regional Setting: English)
System Manufacturer: NVIDIA
System Model: 122-CK-NF68
BIOS: Phoenix - AwardBIOS v6.00PG
Processor: Intel(R) Core(TM)2 CPU 6600 @ 2.40GHz (2 CPUs), ~2.4GHz
Physical Memory: 2048MB RAM
Page File: 2386MB used, 1706MB available
Windows Dir: C:\Windows
Display Info
Display device 1:
Device Name: \\.\DISPLAY1
Card Name: NVIDIA GeForce 8800 GTX
Manufacturer: NVIDIA
Chip Type: GeForce 8800 GTX
DAC Type: Integrated RAMDAC
Key Device: Enum\PCI\VEN_10DE&DEV_0191&SUBSYS_C8313842&REV_A2
Display Memory: 1510 MB
Current Display Mode: 1440 x 900 (32 bit) (60Hz)
Monitor Name: SyncMaster 932BW/BW1932/932BWE plus(Digital)
Monitor Max Resolution:
Driver Name: nvd3dumx.dll,nvwgf2umx.dll,nvwgf2umx.dll,nvd3dum,nvwgf2um,nvwgf2um
Driver Version: 8.16.0011.9107
Driver Date: 9/27/2009 15:12:22
DirectX Acceleration Enabled: Yes
Display device 2:
Device Name: \\.\DISPLAY2
Card Name: NVIDIA GeForce 8800 GTX
Manufacturer: NVIDIA
Chip Type: GeForce 8800 GTX
DAC Type: Integrated RAMDAC
Key Device: Enum\PCI\VEN_10DE&DEV_0191&SUBSYS_C8313842&REV_A2
Display Memory: 1510 MB
Current Display Mode: 1600 x 1200 (32 bit) (75Hz)
Monitor Name: Generic PnP Monitor
Monitor Max Resolution:
Driver Name: nvd3dumx.dll,nvwgf2umx.dll,nvwgf2umx.dll,nvd3dum,nvwgf2um,nvwgf2um
Driver Version: 8.16.0011.9107
Driver Date: 9/27/2009 15:12:22
DirectX Acceleration Enabled: Yes
Sound info
Sound device 1:
Description: Speakers (Creative SB X-Fi)
Default Sound Playback: Yes
Default Voice Playback: Yes
Hardware ID: PCI\VEN_1102&DEV_0005&SUBSYS_00311102&REV_00
Manufacturer ID: 1
Product ID: 100
Driver Name: ctaud2k.sys
Provider: Creative
Driver Version: 6.00.0001.1373
Driver Date: 6/4/2009 01:49:08
Type: WDM
Other Drivers:
Acceleration Level: 1
Cap Flags: 0
Min/Max Sample Rate: 0, 0
Sound device 1:
Description: SPDIF Out (Creative SB X-Fi)
Default Sound Playback: No
Default Voice Playback: No
Hardware ID: PCI\VEN_1102&DEV_0005&SUBSYS_00311102&REV_00
Manufacturer ID: 1
Product ID: 100
Driver Name: ctaud2k.sys
Provider: Creative
Driver Version: 6.00.0001.1373
Driver Date: 6/4/2009 01:49:08
Type: WDM
Other Drivers:
Acceleration Level: 1
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 hardware vertex processing
Debug Message: Using multilsample setting: D3DMULTISAMPLE_4_SAMPLES
Debug Message: Attempting to create D3DDevice at resolution 1024 x 768, Windowed: 0, Multisample: 4
Debug Message: Game Resolution: 1024 x 768
Debug Message: Running fullscreen.
Debug Message: HAL (hw vp): NVIDIA GeForce 8800 GTX
Debug Message: D3DPRESENT_INTERVAL_DEFAULT
Debug Message: Refresh rate: 60
Debug Message: Bit Depth: 32 bit.
Debug Message: *********Checking D3DDevice Caps***********************
Debug Message: A full-color cursor is supported in hardware at high resolution modes.
Debug Message: RGB in format 6:6:6, Masks reported as ff0000:ff00:ff
Debug Message: Now Fullscreen
Debug Message: Shell initialization complete
Debug Message: GalCiv2 is activated.
Debug Message: ***** Initializing Game *****
Debug Message: Timer Frequency is 0 23c380
Debug Message: Could not open reg key HKEY_LOCAL_MACHINE Software\Stardock\Drengin.net\GalCiv2UL
Debug Message: Could not open reg key HKEY_LOCAL_MACHINE Software\Stardock\Drengin.net\GC2EU
Debug Message: No files found matching mask D:\GalCiv2\./Data/ShipTemplates/\*.shipcfg
Debug Message: No files found matching mask E:\rwoods\Documents\My Games\GC2TwilightArnor\ships\*.shipcfg
Debug Message: No files found matching mask E:\rwoods\Documents\My Games\GC2TwilightArnor\shiptemplates\*.shipcfg
Debug Message: Could not open reg key HKEY_LOCAL_MACHINE SOFTWARE\Stardock\ObjectDesktop\DesktopX
Debug Message: Initializing sound card.
Debug Message: initailizing bink
Debug Message: No files found matching mask D:\GalCiv2\DarkAvatar\Movies\techs\*.bik
Debug Message: No files found matching mask Movies\techs\*.bik
Debug Message: No files found matching mask Gfx\Tutorials\*.bik
Debug Message: No files found matching mask E:\rwoods\Documents\My Games\GC2TwilightArnor\Gfx\Movies\*.bik
Debug Message: No files found matching mask E:\rwoods\Documents\My Games\GC2TwilightArnor\sfx\*.wav
Debug Message: No files found matching mask E:\rwoods\Documents\My Games\GC2TwilightArnor\Music\*.mp3
Debug Message: No files found matching mask E:\rwoods\Documents\My Games\GC2TwilightArnor\Event Music\*.mp3
Debug Message: Create setup screens.
Debug Message: Clear galaxy settings.
Debug Message: Clear influence.
Debug Message: Clear up laws.
Debug Message: Clear first time events.
Debug Message: Clear wonders and trade goods.
Debug Message: Clear sector mapper.
Debug Message: Set mouse.
Debug Message: Set update timer.
Debug Message: Error flipping back buffer to primary buffer.
Debug Message: D3DERR_DEVICELOST
Debug Message: Device lost
Debug Message: Attempting to reset device.
Debug Message: Device Validated. Attempting to restore resources.