Go back to DX9.0B or newer.
Do continue to ensure the following:
1) Rename the AVI folder to AVI_back
2) Set the color depth to 16BIT
3) Turn off everything in the background like E-mail/ICQ/Messenger, Virus protection and everything in the system tray beside the clock.
Especially #3.
If it does not work still then:
Please run a DirectX Diagnostic:
Start menu –Run - then type Dxdiag, then select each tab across the top of the window, and run the tests on each tab. Then select “Save All Information” button in the lower right of the window. This will bring up a dialog box to allow you to select a name for the file where the information will be saved. You can save it right on the desktop as this will make it easy to find. Then copy the contents of that file from the start to the heading that says “DirectX components” then paste what you have copied into a post in this thread.
my computer(XP(Home) 2.8ghz, DirectX8(used to be current but switched in hope of getting it to work) more then exceeds the requirements and reccomended but freezes my cursor on menu screen..... I tried it on a very old computer that barely touches the requirements(also XP home with directX9) and it worked perfectly.... unfortunately I am unable to use that computer because it isnt mine 
