Actually I didn't change any settings at all. Even without using VDMSound the game works in XP by just launching it. The black screen takes about 20 seconds and then the game starts up.
Of course I most likely have different hardware so there may be something about your PC it doesn't like. Here is what I am using:
ASUS CUSL2-C
Pentium III 850
256MB PC150 SDRAM
ATI Radeon 32MB DDR
SoundBlaster Live! CT4620
Windows XP Home Edition
I also tried it with Windows ME and it worked exactly the same as above, except I did not need to use VMDsound to get audio. I did not change the memory settings or anything else, just installed it and launched ORION.EXE
I was looking through my game documents and I noticed that I have version 1.3, so if you have an older version you might try looking for the update.
Good luck