Im a big EQ nut, Im also a fairly good tech and am surrounded by other EQ addicts / good techs. Im happy to help you out.
I've looked over your rig. Nice stuff. I personally use an nVidia based card and most of my eq/tech buds have also switched to nVidia based cards, so my driver 7.17 advice is out the window. For OS advice, I actually advise against ME, we seem to have best results with 98 and 2K. A big thing to check right off the bat is DirectX debug levels. There is a major bug in DX7 and 8 installs that incorrectly places some DX components into compatibility mode. Usually it is a sound component, which would cause the problems you are experiencing. So, in order to check for DX debug levels, you'll need to get and install the DX Control panel applet. You can get it from
http://www.reactorcritical.com in the download area. Scroll down past the display driver files (nice selection eh?) and locate the DirectX control panel for your installed version of DirectX. Download it and place the .CPL file in your \windows\system folder. Then launch control panel, and you should see a shiny new DirectX icon there.
Navigate through the DX Control Panel (dont go into DXDiag) and find the debug slider bar for each component. Make sure each slider bar is all the way to the left (it will say LESS). Once you've checked them all and corrected any that were not all the way to the left restart your box, launch EQ and let me know if its fixed

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