Hey Rob. I'm sure you've moved on by now, but I just came across this thread last night when I was having similar problems, and thought I would let you know how I worked around it in case it might help. I was playing along just fine until I got the crash when you try to turn in the Leviathan quest to marry Mirabella. So, I downloaded the current patch (1.7), and once it installed the game started telling me I didn't have the right CD in the drive, even though I did. So I went to the official game site
http://www.kings-bounty.com/eng/legend/patches.php and grabbed the older patch, the 1.6.5 one, and it both fixed the crash and let me launch the game. Hope this helps.