I've been having the same problem, and I've never run any version of the game but 1.7, which I installed via Steam. Sometimes I can go a while without a lockup, but sometimes it happens very quickly. It's happened in every area I've visited so far (around the starting castle, to the east and west), both in and out of combat.
I'm running Vista 64 Home Premium SP1 on a quad core Intel Core 2 with 4GB of memory, graphics card is a 512MB GeForce 9800 GTX. All of my drivers are up to date--I upgraded them when I began having this issue, and the problem has not gone away.
I'm somewhat surprised that it's causing such a hard lockup, since my experience with most games in Vista has been that the system restarts the video driver and recovers in the rare case that something goes horribly wrong.
I'm really liking this game, but the locking up makes it pretty much impossible to play. Even when I save after every battle, periodically rebooting and restarting the game is a bit much.
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