THE ANSWER!!! Spread the word!!!
You are not the only one with these symptoms: Running Vista x64. Warcrat 3 on launch fails to initialize Directx and tells you to install 8.1 or higher. You Reinstall the game, drivers and directx. Enable compatability mode and Run as Admin. Nothing works.
Well the answer came to me in a flash today when I was thinking about old DOS games that I could run in earlier versions of Windows. I thought 'What ever happened to good old OpenGL?' Then it dawned on me... Warcraft 3 came out during the Directx 8.1 days when OpenGL was still a valid and competitive API for hardware graphic acceleration!! I thought War3 MUST have a 'switch' or regedit that could force OpenGL.
Command line switches were usually pretty to figure out so on a hunch I did this...
I opened a run box and typed "C:\Program Files (x86)\Warcraft III\War3.exe -opengl"
HOLY CRAP it started up no problem! And here's the real kicker... I get better performance in OpenGL anyway...go figure.
Anyway this problem is everywhere on Google if you do a search so I'll be posting this info everywhere.
Sorry the answer came later than you hoped but I hope it's still of use to you.
Yours truely... A fat white guy in China.