Having WinXP and FS2, no problems whatsoever.
Interesting error though, please give detail information on following:
User rights you're using. (Administrator?)
How is your hard drive(s) partitioned, and what file system?
In what partition is your FS2 located?
Does other games and softwares work properly?
Edit:
By the way, did you make upgrade install?
If you did, make a clean install. Remember that Windows is an operating system, it is never recommended to upgrade an operating system, instead make a clean install. That ensures that there will not be any **** left, like incompatible drivers or such.