For anyone who may be searching for a solution to this, I have fixed it by downloading a program called dgVoodoo.
If you want detailed info on what I did, feel free to PM me, but the short version is thus:
- Download dgVoodoo (I got it from here: http://www.dege.freeweb.hu/)
- In the dgVoodoo zip there is a folder called 'MS'. Open it, copy all the files inside and paste them into your DW root folder.
- Also in the zip is the dgVoodoo.exe. Again, put it in your root folder.
- In your DangerousWaters.ini, set 'RunInWindow' to 'Yes'.
- Open the dgVoodoo.exe and set up the General and Direct X tabs to your preference.
Personally I found that what works best is to set my DangerousWaters.ini to 'ModeID 3', then choose a resolution of 1280 x 1024 in the dgVoodoo app 'Direct X' tab.
Then when I start the game, it opens in a window and I press Alt+Enter to make it go fullscreen. It seems to look and play just like playing normal fullscreen mode...but without the graphical issues.