0. Install Heavy Gear 2 without any included fixes. (http://thepiratebay.se/torrent/4626342)
1. Install the Application Compatibility Toolkit (http://www.microsoft.com/en-us/download/details.aspx?id=7352)
2. Install the DLL fix from Game Copy World (SHELL.DLL) (http://dl.gamecopyworld.com/?c=725495341&f=heavygear2iso_fix!zip)
3. Open the 32-bit Compatibility Administrator app that comes with the toolkit.
4. On the left pane, under Custom Databases, click on New Database 1.
5. On the taskbar at the top, click on Database > Create New > Application Fix.
6. Enter the name of your fix, the vendor, and under Program File Location browse to your Heavy Gear 2.exe. Click Next.
7. Click Next again. We don't want to install any existing compatibility modes.
8. Now, under Compatibility Fixes, scroll down and tick the box next to DirectXTrimTextureFormats, DirectXVersionLie, Force 640x480x16, and Win98VersionLie.
9. Do a Test Run to make sure it works. Start a campaign or instant action.
10. If it does, Click Finish. If not, try messing around with some of the options in there - we need to emulate an old PC using the settings. (Make sure the ingame graphics settings has resolution set at 640x480x16 or x32)
11.Click save at the top. Call it HG Fix, and then it will take you to the install directory. Call it HGFix there too.
12. Now right-click New Database 1 on the left and click Install.
13. You should see a confirmation message and you can close the Compatibility Administrator.
14. You can now use the regular shortcut to launch HG2 and everything should run perfectly.

If you go to launch the game it will probably bother you for a CD. Click cancel and then say yes to playing without CD audio (all the sounds are still there). It should work.

To further enhance graphical settings, use your video card drivers (ATI/Nvidia control panels) to set things such as anti aliasing and anisotrophic filtering up very high - it will help reduce the eyesore of super low resolution on a big monitor.