I had the same problem. I found this solution (no patches) on another site, and it totally worked for me. flawless.

Do the following:
1)start>run
2)type regedit
3)choose HKEY_CURRENT_USER
4)choose software
5)choose Crystal Dynamics
6)choose Soul Reaver 2 then 1.00000
7)double click on a file called disablevshader....
8)change the value from 0 to 1

I have the following hardware:

Intel Core 2 Duo E6400
Intel mobo DG965RY
XFX nvidia 8600GT
2 GB RAM

And the following software:

Windows XP SP2 build 2600

Soul Reaver 2 runs fine, without problems if vertexshading is turned off in the registry.

Do the following:

1)start>run
2)type regedit
3)choose HKEY_CURRENT_USER
4)choose software
5)choose Crystal Dynamics
6)choose Soul Reaver 2 then 1.00000
7)double click on a file called disablevshader
8)change the value from 0 to 1

thanks to stallyn for the vshader tip...... sr2 works like a dream now