Just managed to fix it, I think it was actually a driver issue - I had updated to 8.1.2 but had not installed the follow up driver package, which may have solved my problem. Thinking back, I had some trouble with getting the acquisition card recognized at one point, and the image from another scope had some slightly flaky front panel lights... probably all related.
Instead, I poked around for a bit with settings and eventually did a clean windows install suspecting some sort of driver corruption/conflict from the image I had used copied from another machine. I learned a couple things in the process!
To do a clean install of XP over the normal partition:
Install Windows XP as normal
Install D865GLC drivers (no longer available form intel, but hosted on third party sites - consists of chipset INF drivers, LAN drivers, Audio drivers, graphics drivers) - this was on a later model 7300, there are different mainboards used so check the board markings or open up CPUZ first to verify!
Install the 8.1.2 XStream package
Install the accompanying XStream driver package - on my unit, one driver failed install, but if you manually point it to LeCroy Data Acquisition devices later it will install fine
Install the touch panel drivers (not included with the XStream driver package, as it suggests in the how-to installation guide) which is UPDD v3 with support for the 3M SC4 Serial touch controller driver - not officially available for download, but a link I found for version "3854" included the needed drivers and installed properly. The official UPDD current version does not open on XP 32 bit.
That should get your WP 7k to boot into the scope application and function successfully. You'll need to calibrate the touch screen (can be done from the utilities menu) and if you don't have the cal data on the second partition, you'll need to calibrate it too.