Install a supported video card and driver that works with the game.

I recently got it to run successfully using a Dell Studio XPS 1340 with Nvidia Geforce 9400M Graphics card with Driver v270.73 on Windows XP.

So a desktop video card around the same chipset with that driver version should work.

I haven't tested the game on the same laptop with Windows 7 yet so it's also possible that WDDM drivers could cause the game to not work. If so use the XP drivers in Windows 7.

It *might* be easier to get the Linux version of Heavy Gear 2 working.

install a support video card and driver..where?in the vmware xp machine?on windows 7 i have nvidia geforce8800

IIRC the game requires D3D6 which isn't supported in any VM software. You'll have to run it on the host. (Your mouse issues btw are likely caused my the mouse additions which aren't compatible with some games. Standard practice is to never install the mouse additions in any VM software if you want to play games)

Since you do have an Nvidia card that is fairly old then you'll likely need to play the driver version game. (Either old drivers and/or Windows XP drivers on Windows 7)

If that doesn't work then you'll need to switch out your video card.

hmm about the mouse issues..i tried alt-tab and set the affinity to "low",then switched back to the game..andthe mouse speed was normal.after i started a new game though it chrasded with a bsod.after that i treid again,but looks like this priority setting is not working anymore

so i should install older drivers on windows 7?what about the mor recent games that works with newer drivers? 🙁

If you install older drivers then newer games will suffer but if that's the solution to fix the problem then that is what you have to do.

Other options:
Play the game on another computer
Try to get the Linux version to work.