Both of you have to understand that the game can only run in a resolution that is less than (windowed) or equal to your current screen resolution capability.
If you run your desktop in 640X480 then windowed mode will probably fail. And if your card isn't able to do 1280X720 it will also fail in both modes.
You should all be running with DX 12 installed.
It would seem that most people having issues are having them on Win7. You really need to think about upgrading your OS.
I use Windows 7 Ultimate (x64) with DirectX 9 installed but I'm not seeing the same problem everyone else has been talking about. So I can verify that it's not an OS issue. The problem is with the graphics card drivers and/or DirectX itself.
Edited to include PC specs..
System Specs
PC: Custom built..
OS: Windows 7 Ultimate (64-bit)
CPU: AMD FX-8320E
GPU: AMD Radeon R7 250 Series
Motherboard: Asus M5A78L-M/USB3
RAM: 16GB DDR3
Other software used: Adobe Flash Player v30.0.0.113, Unity Web Player v5.3.8f2, DirectX v9, The-Codecs v5.0 (Theoretica DivX), DivX web player v2.6.3.88
Granted, the hardware isn't the greatest (it suites my needs), but I've never ran into any problems with this game or any of the animated scenes in other AVNs. And as you can see, I can play it just fine..
When I play this game, I set my display settings to 1920 x 1080 (with "windowed" unchecked). I also make sure that I select the same setting in the game's resolution drop down menu and select the highest graphics quality the game will allow ("Fantastic"). Others I've talked to in PM about this have tried various resolution settings, however they're still experiencing the same error. That leads me to suspect the drivers for the graphics card or it's an issue with DirectX. Though I've not narrowed it down any further than that.
Also, I should point out that those whom I've spoken to about this problem are either using Windows 7 or Windows 10 so the problem exists in both Windows platforms.