I found this on Google:
right click on your desktop to get into your display properties
click on the settings tab, and click on the advanced button
in the new window, click on the troubleshoot tab
now, move the slider for Hardware Acceleration down, one setting
click all the Ok buttons to get out of it, then try running diablo...
if it doesn't work, go back in and take the slider down another notch, keep doing that until it works....
I'm finally able to enjoy Diablo I again, and on XP, no less.... this worked for me, hope it works for you as well