• Install the game.

• Get dgVoodoo2 from http://dege.freeweb.hu/dgVoodoo2/dgVoodoo2/

• unpack it, copy all the dll files from \MS\x86 folder to game folder (where l3.exe is located)
this will fix the issue where the game wont start, you don't need the winXP3 compatibility on the l3.exe anymore, also it will make the game run fullscreen without that window border

• you can change settings in options but make sure to exit the options screen from either the "Keyboard Map" or "Joystick Map" section - the game will lock up if you exit from other screen. (Weird, I know, I discovered that trying to run the retail version long time ago on Windows 7)

• you may play in 3d accelerated mode using dgVoodoo Direct3D wrapper or switch to 3Dfx, but for that you would have to use dll's from 3dfx folder (from dgvoodoo2 folder) or use nGlide.
No need to manually edit ini files to change resolutions etc. - just enable 3d acceleration, set 3d card driver to "Direct3d using DirectX6" and set 3d device to "dgVoodoo DirectX Wrapper" in game options