is it vista 64 bit your running or 32 bit, you can try right clicking on the 16bit application and selecting properties then compatability tab, try chaning the different options to see if they work prob the 640*480 sceen resolution might help with the full screen issue.
Or using a virtual machine installed on vista might help i use vmware and then you can install different operating systems that have worked previously.
Have a look at these links the comments at the bottom of the blog are prob the most helpful.
http://blogs.msdn.com/oldnewthing/archive/2005/10/05/477317.aspx
http://blogs.msdn.com/tims/archive/2006/05/28/609372.aspx
