Try increasing the cycles a bit. CTRL+F12 increases them, FTRL+F11 decreases. Your machine should handle over 20000 - try increasing that.
Make sure that the XP's CPU usage graph is running in the background so that you can find the maximum cycle count for your machine to handle.
Next, did you change the soundcard emulation like I told you? If not, do it. Then run Phantasmagoria's sound config utility (should be under something like "setsound" "config" "install" etc. in the game directory) and change the configuration to exactly match the values I gave you. If the soundcard the game is trying to use is different from the emulated one, compatibility problems may result (sound stutters & crashes among others).
In
this thread, Data suggests changing Blocksize and Prebuffer to 4096 and 30, respectively.
Did you try running the game with VDMSound? What were the results?