I have got this running on a 64bit Windows 7 system. This only works for Nvidia cards! I do not know if this is possible with ATI cards sorry and PLEASE make sure your monitor supports the added resolution BEFORE trying this

1..Copy all contents of your killing time cd to a separate folder on your hard drive
2..Download the ls3engline setup.exe from http://www.reactos.org/forum/viewtopic.php?p=90351 and place into the folder you have just copied your cd contents to
3..Run the new setup32.exe and let it install just ok the error that appears
4..Once installed there is no need to edit the registry for the cd as it just creates an empty directory.
5..Now Install the ACT 5.6 from Microsoft and run the 32bit version. There you will see an application box on the left plane. Click the + and wait for the list to open. Scroll down and find the Killing Time entry, right click and select copy and paste into the bottom entry under Custom Database (right click New Database and select paste)
6..Click Save at the top and select a name and save it in your Killing Time Installation directory
7..Right Click in ACT your Killing Time Entry and select install
8..Now here's the trick, if you just try to run it now you will get it to run but it will crash just before the video. Open up your nvidia control panel and select change resolution under display on the left panel. Select Create Custom Resolution and in the horizontal box enter 320 and in the vertical box enter 240. In the color depth enter 8 (256 colors). Click test then yes to add the new resolution.
9..Create a batch file and put this in your Killing Time Install Dir with these contents

taskkill /F /IM explorer.exe
KillTime.exe
Start explorer.exe

10..Start the game!

Runs like a dream for me, I hope this helps others in the future

Edit for future reference I have attached the ls3setup to this post, you never know it might be hard to get hold of in the future 😀
Also I am have not tried this guide without doing the ACT parts 5-7, who knows it may work without the ACT fix.