Why does S3.exe needs elevated system access? It is very annoying.

Can I somehow prevent this? Without disabling UAC, of course.

Apart from that I'm glad it's available for modern systems. I'm very thankful to all who made this possible.

Probably to access some of its registry files. You can manually set the executable to run as administator at all times in the Compatibility tab in its properties, but I see no harm in disabling UAC together. I never regretted it and it saved me a lot of trouble with many games, older and newer.