I just spent a hour with this and it's looking pretty good.

I used the exe bobboau posted with D3D8, 1024x768x32, 2xAA and the command options -htl, -t32 and -d3dmipmap and everything worked fine for the most part. The game speed is for the most part excellent, far better than the last few versions and even faster than it was with the original 1.2, but there are some strange slowdowns every now and then. I haven't figured out exactly what is causing this, but it seems to happen when turning to face either thick backgrounds or lots of ships with engine trails. I got the inexplicable mid-mission CTD as well, but it only happened once.
I noticed a weird graphical effect in one mission; when a red sun (might happen with other colors too) shone on an Arcadia from a particular angle, some of the textures starting flickering wildly, especially the large glowmapped section just under the station's hole thing, and the colors looked a bit strange. This might be fixed by just using a proper shinemap, though.
There was also a freak thing with the beams that I could not reproduce; at one point I was watching a battle from a distance (6km) and the beams were looking very faint, almost invisible (sort of like the faintest dropoff part of a missile trail). If I changed the view to that of some ship close to the action, it looked fine. I started to get closer to the fight to see what distance they would render properly from, but they suddenly started looking fine and I couldn't get them to look strange again even if I went far again or restarted the game.
I saw another problem that probably has more to do with the media vp; the background nebulas are noticeably blurry and low-res compared to how they used to look. This only happens with the default ones however, since some custom stuff I made (which is of the old 8-bit 256x256 pcx variety) looks fine. I tried putting the old ones from sparky_fs2.vp into the effects directory but that didn't seem to do anything; did you change the file location priorities or something?
I also saw another small bug in there, but it is related to a particular sexp and wouldn't have anything to do with this executable; will post a bugzilla report later.