yea a P4 is no longer midrange.  try turning up your virtual ram, it sounds like its running out of memory.

Theres nothing wrong with your system, its just bad coding in an otherwise great game. I had the same problem and still do in fact, howver there is a workaround if your willing to play the game without sound. Just right click on the shortcut for the game and add /nosound at the end of the text thats in the Target box. For example it should look like "....Demigod.exe /nosound" without the quotations. Press ok to save the changes and go start the game as normal. I basically compromise the lack of sound by putting suitably epic music on. Hope that helped.