Sorry if my topic a bit long, but here are my solution under Windows XP
SP2 (many of my old CD games are backed up in CD image!!!!):

Mount CD-image/insert CD and right click on SETUP.EXE, then
set COMPATIBILITY Mode to WINDOWS 95 and install the game
(e.g C:\FTA2) Better to select Maximum (300Mb) install !!!!
In the installed directory right click on FTA2.EXE and set WINDOWS NT
or WINDOWS 2000 COMPATIBILITY Mode. ANY OF 'EM worked!!!
Play the game.
WARNING!!! IN THE OPTIONS (CONTROL Panel) DO NOT CLICK on
CREDITS, anyway the game quits!! It has been happen on WIN XP
or WINDOWS 2000 OS !!! I guess again the smacker was the problem.

If you want to play WITHOUT CD inserted/CD-image Mounted then
- COPY the \VIDEO path from the CD to the installed game dir.
- go to your \WINDOWS root and EDIT the file FTA2.INI in the
line VideoPath= to your correct installed path.
(e.g C:\FTA2\VIDEO)

That's it...