Do you have the ms-dos or the Windows version?

I have them both, that how it was published. My problems are that in Windows version I can't adjust the compability mode to windows 95 and in Dos version VDMSound doesn't work because it can't show SuperVGA in 640x480 mode. Dosbox plays the game too slow because of my "crappy" processor AMD 2800+ (speedening the dosbox doesn't help).

Tried ALL different compatibility modes? Sometimes it works using another setting (even if it seems odd).

Yes I have, with compatible modes :
Windows 95 & Windows 98 / Windows ME
it says "You do not have suffiecient virtual memory available" and do not run.
with compatible modes :
Windows NT 4.0 (service pack 5) & Windows 2000
the game runs fine (like without compatible mode), but when trying to read books, messages, credits etc.
game quits to desktop.

VDMSound says when starting dos version
"Attempt to set SVGA mode 0x101 failed" (althought there is VESA option marked on in VDMSound)

That VESA option is actually a misnomer in VDMSound. It just means "run in fullscreen mode". Nothing VESA related.
What videocard do you have?

VESA mode 0101h is 640x480x256c. Tried other options in the compatibility tab? force 640x480 mode? disabling themes?

And what about DOSBox?

Ok, so VDMSound do not have any VESA support.
Yep, I have tried every compination what can be thinked in compatible pad.
Even tired to change desktop resolution to 640x480 256c.
The game is too demanding to run in DosBOX for my CPU anyhow.
My videocard is RADEON 9200 + directX 9.0c.
The game requires directX 3.0 might this be the problem?

Game can be played if does some tinkering around, like playing everything in Windows (in nice speed) and when there is book, etc. Then save game and run DosBOX (r u n s v e r y s l o w l y) + load saved game and read the book. This is still very slow methot so, if it could work full in Windows that would be great.

I have a wild quess that if the game could start on win95 compatible mode, then it would work, because it was designed to WIN 95. But it gives that Virtual memory problem when trying that.

If game runs under DOSBox it's a MS-DOS game, not a Windows one.

By the way. What did you try for DOSBox? Tried any recent CVS?

No, in the CD there is both versions available for install : Win 95 and DOS.
I have installed both for seperate locations.
In DosBOX I dont think this game could run fast enough for my CPU, although I tried to set speed with different cycles.

Indeed the game may be too cpu demanding for your processor as it's
from about 1997 according to moby games.
Yet be sure you tried the combination core=dynamic AND cycles=auto
in your dosbox.conf.

Unfortunately this did not help either. It was as slow or perhaps even slower than my own tinkering around with DosBOX, so lets forgetabout DosBOX for this game (in my case anyway). Any other help is most appreciated.

It works quite well for me on a similar cpu, it surely doesn't get 30fps but
that's not really important for that kind of rpg.
Play with the output= setting and try some cvs builds.

Yeah! I finally got it working!!!!
I used Virtual PC 2004 program and took Windows 98 settings and installed my old Windows 98 to Virtual PC 2004. Then just install windows version of Faery Tale Adventure 2 and play. Speed is original (not slow at all) and everything works good (reading books etc.). So thanks everybody for trying to help!
My tinkering around worked like a charm.

Case is solved.