I've played it in 1024*768 16bit color, no problem (bit slow on my machine) but it's odd you can't play in 800*600... maybe you've got 3d switched on and your card doesn't support it? then no resolution will work..
Try switching that off and try again..
Btw, anyone tried this? very cool:
[baldur.ini]
Game options:
HP Over Head=1
------------------
|