Last time I played this game with a non GOG version on an older PC it worked fine, as far as I remember, now it lags horribly.

High Resolution looks rather nice but the framerate is awful and the Overlord flickeringly limps when he moves (even in low settings) Am I doing something wrong here?

I use Win 7 64Bit Pro, i7 2.4GHZ, 8 GB of Ram and an ATI HD 5970 (Dual) GPU.

Yes, there must be something wrong, because your system should run it smoothly.

Check the Control Center of the Catalyst driver:
- Go to 3D => All Settings and switch every option to "Use application setting".
- Catalyst A.I. on Standard should be fine, no need to turn it off.
- Also Mipmap Detail Level should work on High Quality (you can try lower)
- Set Wait for vertical refresh to "Off, unless application specifies".
- Enabled Adaptive Anit-Aliasing should work, but you can try disabling this.
- Disable "Triple Buffering" in OpenGL settings.

Make sure, no other application causes heavy system load. Go offline and disable any kind of security suite, to check whether this causes problems or not.

I notice you stated you had a dual GPU. I take it you are running in crossfire. This is probably the problem. Use the Control center to turn off one the GPU for this game and it should then work fine. I have encountered this in some other older games for both SLI and Crossfire systems. They were not designed with that in mind when they were made. Turning one off normally does the trick.