I just bought a brand new laptop which, as all brand new laptops nowadays, has Windows 7. I installed Diablo II and LoD, and it wouldn't run because of compatibility issues. That problem was easily fixable in Vista with the compatibility wizard, but with Windows 7 it didn't work; when set to XP Service Pack 2, it would open but "blink" between the game and the desktop, and when set to Windows 98 it wouldn't launch at all. I tried changing from Direct Draw 3D to 2D, and it wouldn't launch.
So all you gotta do is run d2 (in winxp SP2 compatibility mode), and press alt-tab to bring the focus back to windows.
Once there, push ctrl+alt+del keys and select the option "open task manager" (or something like that). Once you do that, at the top you'll see four tabs. Select the "processes" tab, look for the one named "explorer.exe", select it and click "end process"(or something like that). This will make your taskbar at the bottom vanish. press alt-tab to switch back to d2 and it should work fine.
Just go to properties and you should be able to have a command that will allow you to run it on windows 7. But im not 100% sure about that. Go on blizzard.com and you will get more information or send blizzards a message.