
I am running windows 7 ultimate and have had very little problems (occasional minor bug or crash). However I seem to have reached a bug that stops me dead in my tracks.
The Bug/Crash:
I arrive at the tavern in Choth and speak to Lokath outside. I go through the normal conversation between William and Lokath and a battle ensues. After the battle between his 2 men and mine I hit ok at the conclusion of the battle as usual. My inventory is half empty so I am surprised to see one of the characters saying "Looks like our pack is full" and then instantly I am sent to a white screen and the game force closes.

Things I have tried:
I have changed compatibility mode to XP and 95.
I have loaded a previous save and spoken to him.
I have completely emptied my inventory before combat.
(did not try changing my weapons but I thought that would be pointless)
I am unable to install the 1.1 patch due to incompatibility with windows 7. (or so it tells me)
I am open to suggestions? Has anyone else encountered this bug?