Unfortunately if the card does not support SM2 it is a hardware issue that will require an upgrade. You might try updating the drivers, if they are generic it may not detect the hardware compatibility, longshot there though.
Depending on your Motherboard (if it has PCI-E) the upgrade can be pretty cheap, a nVidia 9800GTX can be had for under $100, look at the best card for the price guide here on toms. If it's AGP you are pretty limited, but there are still several options out there for reasonable prices.
I am having a similar problem - I had to get a new video card (ati radeon hd 4650) and now my sims 3 won't play - says almost the same thing (Unable to start the game. Device 0 cannot run this title. No supported video graphics card detected. Please check your system hardware.)
Is the new card too much for the game or something?
You must upgrade your video card with at least support for pixel and vertex shader 2.0. and usually you need to reinstall your games if you change you graphics card because the games already identified your old card.