Ah, I didn't realise there's a whole bunch of presets in the "exports" folder of DxWnd! Also, I presume you meant dxwnd.dxw for step 1, cause that's the one in the game's root folder. It works, and the mouse behaves reasonably well too! Thanks so much :) I only had to set the path, and a better window size (1280×960 seems to strike a good balance for a FullHD screen). Do you maybe want to post a steam guide on this? That's probably the first place people look at, and the one there now is a bit outdated....
Tried it with 2.05.47 and couldn't get it to launch, unfortunately (tried replacing the dlls with the ones from proxy folder too). It's worth mentioning the game's free to play on Steam, if you're inclined to take a look ;)