I'm not sure what kind of performance you were expecting. You already said yourself that the notebook was slower than what you're used to, then on top of that you have the Virtual PC whose emulation will add a whole new layer of slowness on top of the notebook.
Anyway, let's try this to see whether DirectX is the issue (it most probably is):
1) Go to the Start Menu
2) click "Run"
3) type dxdiag and press Enter
This will bring up the "DirectX Diagnostic Tool" that comes with the DirectX installation. It will gather some system information which might take a minute or 2, so be patient. Once it looks ready, click the "Display" tab.
4) Take a look at the "Notes" section and see whether it says "No Problems Found". If not, take note of what problems it said it found.
5) click the "Test DirectDraw" button. The program will now direct you to a series of tests, where it first tells you what you should be seeing, then it does the test (generally some animation of a box bouncing around), and then it asks you whether what you saw matches what the program says you should be seeing. You should pass all tests. On my machine, I recall there were 3 or 4 tests it did.
Let's start with that for now and see where you go with that.
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I'm not very familiar with DirectX, but I think what can happen is, the program when using DirectX can ask for certain capabilities it needs, and if the hardware doesn't support it, you'll end up with the "cannot create primary surface" error. It's possible that under a VirtualPC, its emulation of the display system isn't sophisticated enough to support the capabilities Cheapo might need.
