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[This is a copy & paste from "Death Marine's Journal.: All credit goes to him.]

I found a super easy way to get Dungeon Siege working for Windows 7.
When you try to play the game a window will come up with some bull about having compatibility problems. Here is what i did to get the game working perfectly on my Windows 7 x64 (64 bit):

1. Make sure you install DirectX 9.0c since Windows 7 doesnt come with it!
2. Install the game like normal
3. Go into the directory were you installed it probably C:\Program Files (x86)\Microsoft Games\Dungeon Siege
4. Double click on DSVideoConfig.exe
5. It will probably say Primary Display Driver Hardware change it to whatever video card you have. For example i would change mine to NVIDIA GeForce 8800GTX Hardware DO NOT PICK THE ONE THAT SAYS TnL
6. you can pick whatever resolution, shadows or filtering you want and click OK
7. Now play the game!

EDIT: If you are going to play Legend of Aranna you have to go into your documents folder go into the Dungeon Siege folder open your DungeonSiege.ini file and copy the first 3 (4?) lines. Go back to documents folder and go into the Dungeon Siege LOA folder, open the DungeonSiege.ini file there and paste it over the first 3 (4?) lines there.