I have a similar problem to the OP (Mercenary not working, but Legends does) with, I think, different reasons.
Upon attempting to load the game, I get a small error box appear saying
EvochronMercenary.exe - Application Error
The application was unable to start correctly (0xc0000005). Click OK to close the application.
I've attempted a driver update, and all the usual suspect things - even tried downloading from other mirrors on the official downloads page, but to no avail.
My system is as follows:
Windows 7 Home Premium 32-bit (6.1, Build 7600)
Intel Pentium 4, 3.00GHz (Hyper-threaded)
3072MB RAM (DDR type, spread over 4 motherboard slots as two 1GB and two 512MB)
NVIDIA GeForce 7600 GS (512MB)
Direct X 11
I've tried running the game through a compatibility, but no joy.
I've not had any issues with other games of similar specs, and as mentioned I haven't had problems running previous Star Wraith games...
I'm still trying to run the game in demo, I've never played Mercenary before, but would like to try it (and hopefully buy!)!
Any help would be appreciated - I'm not really sure where to start with my troubleshooting.