Just installed Grandia and it worked almost perfectly out of the box (which is more than I could say about Vista). The only that that don't seem to work are the cut scenes (the first cut screen shows up as a black screen and needs to be skipped using F9) but that should be easily fixed by installing some codecs

An update, managed to get rid of video playback problems by setting compatibility mode to XP SP2. I tried CCCP (which WMP wouldn't use to play the vids) and I tried KLM codec pack with allowed WMP to play the vids but Grandia didn't. The compatibility mode option works just fine on Windows 7 without any additional codecs (which surprised me).

Just for your info, this is on the x64 build so your mileage may vary on the 32-bit version.

GRANACLIFFS CUTSCENES AND ALL OTHER CUTSCENE PROBLEMS
I had this exact same problem. Cutscenes would not load for me and skills that played cutscneces such as Millenia's Fallen Wings, etc, would not work. There are two solutions to this. When a cutscene comes up, press F9. This skips its and you can continue the game. (This does not work for attack cutscenes)
The second solution is as follows:
1. Go to your game directory. (ex. C:\Program Files\Grandia 2\)
2. Delete the configuration file. (Config.cfg)
3. Run the GameConfiguration GMconfig.exe.
4. Configure desired seetings then press OK.
5. Right click the newly created Config.cfg.
6. Go to properties and check the "Read Only" box.
7. Click OK and run the game.

The cutscenes such as the beginning into and grannacliffs and attack cutscenes such as Zap or Fallen Angel should work now.