This is so odd. Your system specs sound so close to mine, so why you are having a problem has me beat.
These are my specs.
Log generated on 11/26/2008, 11:24
=== Application info ===
Name: The Sims 2 EP7
=== Machine info ===
OS version: Windows NT 5.1
CPU: 2938.599853Mhz, Name:AuthenticAMD, FPU:1, MMX:1
Free memory: 1684MB
=== Sound device info ===
=== Graphics device info ===
Name (driver): NVIDIA GeForce 8500 GT
Name (database): NVIDIA GeForce 8500 GT <<NOT FOUND IN DATABASE!>>
Chipset: Vendor: 10de, Device: 0421, Board: 18061019, Chipset: 00a1
Driver: nv4_disp.dll, Version: 184.108.40.20624, GUID: D7B71E3E-4761-11CF-396D-0D3800C2CB35
Driver version: 7824
Monitor aspect: 1.666666, <<UNRECOGNIZED>>
Screen mode: 1280x768x32BPP,60Hz
Texture memory: 512MB
HW T&L: Fixed function:1 Programmable:3.0
Pixel program: 3.0
Texture stages: 8
Oh, just realised, you have GEForce 8600, while mine is 8500 (My eyesight or my memory is suffering from senioritis!) but as far as I'm aware, neither are *recognised* by the game, but that's true of a lot of nVidia graphics cards.
Do you by any chance have Zone Alarm?