Windows 7, 64 bit, running Fallout in a window...
http://i49.tinypic.com/68cuox.png

Fallout 1 seems to run fine so far, it just colours everything else on the screen black. I don't remember what patches I have for it because it's been a few months since I first started setting it up, but the black desktop annoyed me so I tried Fallout 2 instead. 2 didn't have the desktop problem, and I finished it a few days ago. I tried to make sure both ddraw.ini files had the same settings before trying 1 again... so I guess I must have the sfall mod installed, at least?

Anyway, it's not breaking the game, it's just super annoying to alt-tab and have to move the taskbar around to remove the black stuff.

When Windows 7 switches to the basic color scheme the desktop background is black if you haven't changed the standard settings of that color scheme.
So your real problem is finding out why Windows deactivates Aero. Normally Windows does that if anything breaks the hardware acceleration mode or something like that.
What graphics adapter do you have? I have the same problem often when switching between Fullscreen and Windowed Modes of DOSBox, and I know the ATI drivers are to blame in my case.
Edit: Oh and how did you get Fallout to run windowed? The only option I found was using a special program that lets you run everything windowed that uses Direct3D.

I'm pretty sure I'm using the sfall mod to make it windowed. There's a file called "ddraw.ini" and under the graphics options, I have it set to Mode 5, for dx9 windowed. Then I have the size set specially (GraphicsWidth=1152, GraphicsHeight=864 —my monitor is 1600x900) so the game plays in the upper left corner of the screen and doesn't get hidden or blocked by the start menu. And then one of the scalers enabled so it doesn't look horrid. That's all in the .ini file. There are a bunch of other options but none of the ones I've poked change anything worthwhile.

I've tried DXDWind and D3DWindower, and neither seem to do anything that sfall's .ini file doesn't. In fact, if I rename that .ini file, neither one will work. Haven't tried them with Fallout un-patched by sfall, though, so that could be one problem.

Ah, but I'm not using Aero. I prefer the Classic taskbar. And it's not really the desktop turning black... parts of Windows Explorer (if I have a folder open) will turn black, and so will icons and other things in the task bar.

My graphics stuff:
Card name: ATI Radeon HD 5570
Chip type: ATI display adapter (0x68D9)

I don't think I have the latest drivers for it, though. Last time I tried to update them, the installer crashed my computer. I don't even have the Catalyst Control Center app for it because of that. *shrug* It's never been a problem for games or anything, though.

I'm going to play around with Hardware Acceleration Mode, though! Thanks for reminding me about that. Used to have a problem where print-screening a video and pasting it into Photoshop or Paint would make a black box where the video was; like a hole in the program that could only see the video beneath it. Weird stuff, but most likely similar to what's going on now.

Edit: Bother, doesn't seem Windows 7 lets you fiddle with that anymore.

The thing about the blackness is it seems to be exactly like the blackness described IN the game; it goes away when you move your mouse cursor over it. But in the case of the taskbar, you have to move it around to get rid of all of it, or there are lines leftover between icons and buttons.

Hmm ok, sounds like some "normal" graphic bugs. Unfortunately I don't have a clue at the moment what could be the cause in your case.
But it is always a good idea to install the graphics drivers properly, maybe it works then.

I used D3DWindower to play Fallout 1 windowed for a little bit because sfall did not work for me, I don't know why and didn't care to find out when D3DWindower worked.

Yeah. Seems there's a dozen different ways to get windowed mode, and most of them don't work for everyone. Gotta try 'em all!

I ended up re-installing the game, started using the ultimate mod pack thingy in the FAQ thread, and stopping before I used sfall, but the windowing programs still wouldn't do their job.

Got it to work in the end by setting up a virtual machine running Windows XP. I had tried it a few days ago, but it was super slow (also tried 95: wouldn't run. 98; game crashed.) This time, it runs fine! D3DWindower worked, but I wanted it full screen inside the emulator, and couldn't seem to do that without it sticking to 640x480, so I ended up using sfall again, Mode 4. VMWare stretches the window to fit, and everything is wonderful. :D Still no real idea how the speed issue got resolved by a new install, though.

And still didn't defeat the black beast, of course. Sorry, future same-problem-havers. I've let you down...