According to Atari's Support page:
PLEASE NOTE THE FOLLOWING IF YOU ARE TRYING TO RUN THIS GAME UNDER WINDOWS XP. THIS PATCH IS REQUIRED FOR THE GAME TO WORK!
A patch has been released for Balls of Steel that will upgrade your game version to 1.3. This version adds the following features to the game:
* Key selection in the menu for flipper, plunger, and nudge.
* A fix to permit extra ball awarding in Arcade mode.
* A fix for Duke extra ball dotpanel display sequencing.
* A fix to prevent Enter skipping highscore entry until highscore title shown. Increased maximum capping and adjustment for Powerball enabling.
* A fix for 2-ball jackpot totaling in Firestorm.
* A video driver update for problems with Matrox Mystique and Riva cards.
* A fix for problems with cards based on Rendition chips.
* A fix for problems using Video Setup button after installation.
* A fix to allow single-screen view only on video cards less than 1Mb.
* Automatic resetting of display profile if video options changed in menu.
* An extra utility that will allow you to reprofile your video card should you run into trouble, or change video drivers, etc.
Have you tried to use the extra utility mentioned above to see if reprofiling might help?
Also, I have seen some discussion in 3D Realms forums that the latest Wildfire downloads of two of the tables from Balls of Steel have been tweaked for Windows XP. You might download those tables and see if they work.
Good Luck!