Every time I start up magic carpet 2 and enter a world, I press d to bring up the options menu and find that reflections are turned off (default), the game is running low-res, and in general most of the pretty options are turned off. As I find it extremely tedious to change all these settings every time I start up the game, I'm wondering:

1) Is there something I'm missing, perhaps a way to get my preferred settings to stick?

2) If not possible in-game, would it be possible to change the defaults themselves to my preferences?

I remember having had similar issues, but I don't know if I was able to fix it ;-) Anyway, I'd try running the game as Administrator, maybe the settings can't be saved due to missing access rights and I'd turn off any Compatibility Mode if set.

Well, that solves part of it. It appears graphics settings are save-specific, because saving after changing the graphics settings and loading the save after restarting the game saved all but the resolution setting, which is easy enough to change quickly (r key).