So I dont know if any of you know this but FO3 is not optimized for windows 7 or 8. Everyone else has the same problem. So dont let some tech tell you its your computer. It just doesnt work.

Im reinstalling and trying a fix i found on youtube ill let you all know if it works

That's the nVidia clone mod. It appears to work for those using integrated Intel graphics cores, and possibly for those with nVidia cards. AMD/ATI GPU owners appear to be out-of-luck for now if the other suggestions (particularly the INI file changes and update of Games for Windows Marketplace) don't work.

What is your GPU?

Everything seems to work ok. I cant post a link so go to youtube and type how to: run fallout 3 on windows 7. the video is by coldmeat247

I am also running AMD 6570 btw

Hope this helps everyone it works for me

I'm taking the "inundate Games for Windows LIVE Marketplace support with crash reports" approach. The idea is support is supposed to be handled through them now, at least for crash reports: www(dot)microsoft(dot)com/en-us/download/details.aspx?id=4590

Maybe if crash reports were actually generated. The copy protection features provided by Games for Windows LIVE may obfuscate things to the point that the average joe cannot hope to fix their legitimately licensed game.

Breakthrough!
1) Download Process Explorer from Microsoft (Sysinternals).
2) Run Process Explorer and go to File > Show Details for All Processes and enter your Admin credentials if necessary.
3) Run the game in windowed mode to ensure ease in switching between applications using Alt+Tab.
4) Once the game freezes/locks Alt+Tab to the Process Explorer window and right-click on Fallout3.exe (Do Not Suspend It!) and select Properties.
5) Go to the Threads tab and verify which one is consuming CPU cycles non-stop.

For my case it is WINMM.DLL. You can select the thread and then click Stack in the bottom right of the window to see what it is doing. Here were the culprit threads for my issue:

DSOUND.dll!?QuerySystemSettings@CSensDirectSound@@IAEXABU_GUID@@AAKAAI22AAH@Z+0x3a83DSOUND.dll!?QuerySystemSettings@CSensDirectSound@@IAEXABU_GUID@@AAKAAI22AAH@Z+0x143f7DSOUND.dll!?QuerySystemSettings@CSensDirectSound@@IAEXABU_GUID@@AAKAAI22AAH@Z+0x11fd6DSOUND.dll!?QuerySystemSettings@CSensDirectSound@@IAEXABU_GUID@@AAKAAI22AAH@Z+0x11fa7DSOUND.dll!?QuerySystemSettings@CSensDirectSound@@IAEXABU_GUID@@AAKAAI22AAH@Z+0x73bc7DSOUND.dll!?QuerySystemSettings@CSensDirectSound@@IAEXABU_GUID@@AAKAAI22AAH@Z+0x1704d

Video isn't the issue in my case--DirectSound is!

*EDIT*
Process Explorer gives you the ability to kill offending threads instead of the whole process. I killed the WINMM.dll thread and didn't have sound anymore, but was able to continue in the game!

Disabled Creative Labs Alchemy support for Fallout3 (THIS WAS THE CULPRIT IN MY CASE). Deleted both INI files and the RendererInfo.txt file so the game went back to default. Maxed out the video settings except for turning off antialiasing and limiting anisotropic filtering to 8 samples.

Excellent graphics, working audio, and no lockups/crashes. I'll continue to play to make sure I don't run into anything else, but Creative Labs Alchemy had to be disabled for Fallout 3 in my case. This was my only issue . . . (INI files back at default).

I had reinstalled Fallout 3 at least once while troubleshooting, but if Fallout 3 support is set in Alchemy it will place the dsound.dll and dsound.ini files in the game folder on its own without notification after a fresh reinstall. Support for the game must be disabled within the Alchemy GUI.

Note also that I did not have to login to G4WL.

*EDIT*

Games for Windows LIVE must be updated to the latest version for Windows 7 & 8. No dispute there.

When running Fallout 3 in windowed mode for troubleshooting I have found the fix to prevent minimization necessary.

Right click on C:\Program Files (x86)\Steam\SteamApps\common\fallout 3 goty\fallout3.exe, select Properties, then Compatibility tab, then click the button at the bottom of that window to Change Settings for All Users. When the new window comes up click the checkbox for disabling Desktop Composition. That should be all that is needed. (source: Steam I believe . . .)

Compatibility modes have so far proven unnecessary and running the program as an administrator, if using dll mods as others have suggested, is a major security risk. The use of dll mods and running the game as an administrator has proven to be unnecessary so far as well, at least in my case.

Troubleshoot to figure out your issues and do not succumb to allowing back doors for others for the sake of convenience.