Unfortunately no change, I uninstalled (getting rid of previous saves) and installed again (even tried restarting my machine between that), game is still a mess of colors, and I'm unable to make much out.
Interestingly the colors don't seem to be the old DirectDraw issue on modern Windows, because I killed explorer before trying it and still the same, I'm guessing you guys did something to the executable?

The game seems to be even more broken than before on my Windows 7 laptop. I'm getting all kinds of flickering in the game and especially in the menu.

I've tried switching between integrated graphics and the GPU but that didn't seem to help.

The game worked before on my 7, but I stopped playing it because of a game-breaking bug in the asylum after the chapter with the children. I suppose that isn't corrected by this installer update, right ?

What's the bug? Maybe we can figure out a way to bypass it? Or someone can support you with a save after that section?
I know the village you mention had one game killer, but it's the first time I hear about something in the next chapter.

Please delete this. Posted elsewhere.

I just tried the game with the new 2.0 installer and it works right away but not flawlessly.

First the most frustrating issue that I had with another older game (Chicago 1930) and that is the game is lagging like crazy when I move the move mouse at the same time I hold a move button (basically moving the mouse when my character is moving). The faster I move the lower the performance down to single digit FPS. This is not the first DD game this happens with. If someone has a solution or a trick I could try, please don't hesitate to say because it's driving me nuts.

Secondly the cinematic when you hear some guy talk the video is just a blackscreen but audio is working. After a while the game started. I'm going to explore some more and see if the game is actually stable.

This is with Windows 7 64-bit and I use admin rights, disabled both desktop composition and visual themes. I also changed to WinXP SP2 compatibility mode because Win98 screwed up explorer and colours on my desktop. Now the game says it doesn't support my OS but it does seem to work.

I found an old no-cd fix for this game that have a readme regarding unknown command lines for this game. The author didn't specify the reason behind the flag "-e" but it was supposed to say something about Direct Draw so just out of curiousity I added it to a shortcut to "sntrm.exe" and not GOGLauncher.

Now the game is not lagging anymore, it runs as quick as it's supposed. I've done anymore testing, but does anyone know how I could possibly use this "-e" flag in the GOGLauncher? I would like to play with both so I can see if one of them is more stable.

I also found this: Sanitarium Error in Windows

A user there mentions this: I tried this as well just out of curiousity and I was pleasantly surprised. The colour issue that is present in the game if you run "sntrm.exe" instead of GOGLauncher is gone. Something with DD issues regarding resolution in newer OSes but I'm no programmer.

I can't use the " without it saying the wrong path.

Wow! I think I solved it. I definitely have to do more testing but just out of curiousity that the known solution in Sacrifice with Nvidia cards could be utilized elsewhere with other DD games (DX1-8) I added it through Nvidia Inspector, added the unknown "-e" flag and started the game through the normal exe, sntrm.exe.

I loaded my save before a cutscene to see if the game would crash. It didn't and no performance issues. I'll post more after I've played a while to see if random crashes might still happen.

Mmmhh, sorry for the lack of answer, haven't seen you responded to me. ^^

My problem is that when I try to interact with the gramophone to change the music, the interface disappear and the game stay stuck. I think it happens after I speak to everyone but to be honest iI haven't tried without doing that. It killed the pleasure I had with the game. ^^

You can try that - the conversations are fully optional. Actually, you can explore the surrounding, talk to everybody then load at the beginning of the chapter and rush straight to the office to set the proper record.
There was similar bug in Ch2, but it wasn't triggered by any action - just happened randomly after playing the chapter for a while.

Tried the new installer and it's a step back for me. Now the text, cursor, and animations are fuzzy and choppy. The game still consistently crashes 30 - 60 seconds after the interactive part of the game starts. I've tried every possible combination I could think of of compatibility settings (running it in compatibility mode for 98/ME, XP, SP2/3, and the various Vistas), in addition to the other options of disabling desktop composition, etc. I've run it with administrative privileges. Still no love. :(

I've played a bit and I've got no issues under Windows 8.1, with an nVidia card. Everything is fine. As a side note, the shortcut is set to sntrm.exe after installation, GOGLauncher.exe is in the game directory but I assume it's of no use under 8.