I know I could have done this, but dual-booting has always seemed messy to me. I like as few partitions as possible. Ideally, one for the OS, and one to backup files that I want to save during reformats.
EDIT: At any rate, the point of my post is to inform people that running the game on Windows XP is pretty much flawless, and can serve as an alternative to the .dll fix.
Personally I'd just call it overkill, and I'm good at doing things either to break or going into overkill mode, when something seriously tinks me off to no end. I run a Win7(x64), WinXP(64/32) triple boot setup, it's not hard you just need to decide what you're going to run and why. Win7 I run everything modern(as in the last 3 years). I keep my XP partitions, one for work(x64), and the other for gaming. Since I enjoy a pile of older games that aren't 100% flawless running with Win7 like BG2(and the tutu mod to convert BG1 over).
Once you're set with the game/work or game/game setup. All you have to do then is decide which OS you'll do your day-to-day stuff on and go from there(prolly win7(. The other one will never have anything else other than games installed on it.
I'd also suggest some type of VM ware, but most of those don't support DirectX. OGL in some form? Yes. DX no.