When I try to start MilkDrop 1.03 beta 3 (or any previous versions, for that matter), I get the error you see on the attached GIF.
In this case, Winamp is the only thing running, and I have a Voodoo3 3000 with 32 Megs of VRAM, so I know that isn't the problem. It runs Tripex3 at 30+ fps, and Geiss at even higher rates, so I just don't know what's going on here.
(Yes, I have the latest drivers. Tried that alerady.)