It does, but you have to have a processor with hardware virtualisation onboard to enable XPM. That's something I don't have, so...no go there. :(

While Vista includes DX10, games using DX9 or earlier continue to be rendered with Direct3D 9 or Direct3D 9Ex; since these really are the genuine, feature-complete legacy versions running on the system--not DX10 attempting to mimic their behaviour and features--compatibility is effectively identical to XP on the same system. While new drivers tend to have decaying support for older DX versions this won't be happening to DX9 for a long time yet.
Windows XP Mode has no hardware acceleration; it isn't suitable for recent games.
Anyway, the behaviour Renzatic is seeing would not occur since the VM has completely different, virtualised hardware (except for the CPU), making it its own system. Windows 7 itself isn't necessarily the problem; I played Gothic and Gothic 2 on the Windows 7 beta for countless hours without experiencing any issues, and while I haven't installed them on the RC yet I would be very surprised if they didn't continue to work perfectly.

I'm having this same problem. Running Windows 7 RC with a AMD Phenom and onboard nvidia 8200 graphics.
When I go outside I get flashes of odd geometry, missing objects, messed up sky, and periodic freezing. I've messed with every setting I could think of, including odd things in the .ini file.
One thing that helped a little was changing the way the sky was drawn (zSkyRenderFirst=0), less flashing and messed up graphics, but still freezing every few seconds. Still cant really play, but at least it was somethin. o.O

Same exact issue here as well
Windows 7 RC1, Geforce GTX 275, Phenom II X4 cpu, 4gb.

Arkose, if you're still around, what processor do you have? I and the two guys above me are all sporting AMD CPUs. If you're running a P4 or C2D, then it's possible Gothic 1 & 2 might have issues with AMD chips in Windows 7.

Yes, I have a Core 2 Duo. This isn't the only game that has inexplicable issues possibly caused by AMD CPUs. Did you try the Dual-Core Optimizer? I'm not too sure what it does, but it's certainly worth experimenting with.
It could also be that AMD's Vista chipset drivers aren't fully compatible with 7; while 7 does use the driver model introduced by Vista there have been some changes so not all drivers work as they should. A cursory look at AMD's downloads page indicates they currently have 7 drivers only for GPUs, not CPUs.

I am having the same problem with Windows 7 RC x64 and an nVidia gpu. I am throwing back on Vista and see if I have any luck.

Well I have a Core2Duo processor and an 8800GTS. same problems here. Crashes when I exit Xardas'. It drives me crazy! Tried everything, but no luck..

I put Vista x64 Ultimate back on and everything works great. There seems to be an issue with the Windows 7 driver from nVidia.

I understand this is not an easy fix, but could you guys look into it? I payed for the game but are unable to play it..maybe it is more of a NVIDIA issue, but it is quite annoying.

Sorry for taking so long to get back on this.
I tried some random CPU drivers from the AMD page, and...yup...no luck. The only other common thread all us crash-prone people have is Nvidia hardware. Based on that, I'm pretty sure you could say it's a driver issue, specially considering the few errors that came back at me after the game crashed mentioned that the graphics driver had quit responding at some point after exiting the tower.
Well, the good news is a new set of drivers came out about 10 days ago. The bad news is that the problem might be something so old and esoteric it only effects the first two Gothic games (yeah, Gothic 1 crashes on me too...same issue). If that's the case, we might not ever see a fix for it.
I'm gonna try out these new drivers and see if they help me at all. Wish me luck.

Windows 7 RTM x64 here, Nvidia hardware. Exactly the same problem. I was able to fix it by installing really ancient drivers.
ForceWare Vista 100.59 (64-bit)
This most definetely will break other games, but Gothic II runs great.

Well that really sucks, and I was even planning to buy an Nvidia GPU next time I do an upgrade. :( Hopefully next time Nvidia decides to mess about with something it will inexplicably result in the Gothic games working again (an outcome which isn't as implausible as it might sound).

Oh, I just posted this in a similar Vista related thread, but it seems this thread is the one I was looking for:
I'm having the exact same problems in Windows 7 x64 also.
I have a fairly recent system: Core i7, 6GB DDR3, GTX285, all the latest drivers. Gothic 2 is unplayable as soon as you step outside the starter casle (and yet it's as smooth as silk inside?).
It does appear to be a texture problem with the lager view distances outdoors. If I reduce the view distance to 20%, it's a little better, but still eventually becomes unplayable as I walk further into the wilderness.
Funny thing is, I already owned Gothic 2 + NotR on CD but bought the GOG version because I thought they tweaked their games to run on modern systems?