Just bought the game and its having major crashing issues. I've patched and tried running in compatability modes but it still crashes/freezes. The game freezes in a different place everytime and that was the case when it was version 1.0.

Is it a Windows game?

Yea, it requires windows 95/98 so i assume so.
Heres my specs if this helps:
Hp pavilion ze5300
Windows XP Proffesional SP2
Intel P4 2.40Ghz
960 MB RAM
Video card: RADEON IGP 345m
I have Deamon Tools installed too, havent tried anything with that yet.

Did you try to play with the compatibility settings? This would probably be your best bet, set the game to be run in Windows 95 or 98 environment.

Install another HDD into your machine and install Windows 98SE on it.

so far the only thing I've read that works is installing the additional Hard Drive with Windows 2000.
I've found something else where people have recommended adding /wincursor; -wincursor; and some other forms to the end of the target line of a desktop shortcut. I havent had any luck with this method yet, but what does adding "wincursor" to the end of the target line accomplish?
Heres where I found it:
GameFAQs

Maybe it tells the software to use the windows mouse cursor, or to let windows load the cursor.
It seems that the issue is sound... but not sure as I haven't tried it myself.

warlords on windows xp
 

Had this game before, gave it to someone else who lost it. Finally got a brand-new game, installed it, but when it comes muy turn to move the units, my mouse freezes and the sound effects continue (Example: I move my hero to a ruin. It stops there, investigates the ruin, then the mouse disappears and the hero's footsteps continue.

It ran fine before on the same PC and OS (windows XP). Help!

I tried running the compatibility stuff on it, now it just freezes and themousepointer still disappears--waaaaahhhh!

Try running it in Windows 98 set up on MS Virtual PC or a similar virtual machine.