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I'm running Windows 7 on 64 bit and have nvidia 8800 GTX cards. When I use a spell the timing is right but the screen flickers black, and sounds gets glitchy. It works, but it's ugly. And the more powerful the spell, the more the flickering occurs. Sometimes it even crashes the game if I use a really powerful spell. Tried turning off hardware acceleration, didn't seem to do any good.
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You could give this a try: http://www.shsforums.net/topic/43616-how-to-deal-with-the-ddraw-problems-of-pst-and-other-ie-games/
I had some issues with corrupt spell effects myself, running on Windows 7 Ultimate 64-bit and a NVIDIA GeForce GTX 285. I tried some of the solutions offered on the Spellhold forums, as well as in this thread, but none of them worked for me.

What did work is enabling 'Software Transparency' in the game's video options. I also run the game in 'Windows XP (Service Pack 3)' compatibility mode with the 'Disable visual themes' and 'Disable desktop composition' boxes ticked.
Post edited October 10, 2010 by Lorfean
BTW this is a video card driver issue, not a Windows 7 issue. People have the same problem in XP and Vista.
The NVidia card dddraw fix works fine for me.