Well, oddly enough, I just tried starting up the game, and got the very same error; Seeing as it worked on my very first try after downloading the game, this was kinda odd… so I played around a bit, and found the solution; Luckily, it's nothing too complicated; You just gotta change the DEP settings for the game's .exe:
So to do that on Windows 7, you'd want to go to Start>Control Panel>System and Security>System>Advanced System Settings, then a window will open up; in here, click the "Settings" button located within the "Performance" box, then in the next window, click the "Data Execution Prevention" tab, then click "add", then find the game's .exe and add it to the list, and it should open without problems now!
Do note though that even with the game running, it may not emulate perfectly if you simply play it without the right type of emulation; From the bit I played, it seemed to display correctly so long as I didn't minimize the game, though well… I only played a bit, so I can't be sure. vgperson's blog post on Palette offers some possibilities if you did want to try emulating it, though.
Anyway, hope that ends up fixing your problem.