yes strange bug, I had the same problem exactly in W95, deleted the video.cfg, changed 16 to 32 and back, various resolutions, delete the hires files, redownloaded it, reinstalled : no effect.
then I checked how AH was in W2k (it's a dual boot machine), the shortcut points to the program in the W95 drive : it worked fine (except of course kbd input, but that's another story).
then I booted back to W95 and this time it worked ! very stange.