Either use USB attached DVD drive, or mount Image via cdemu (cdemu load 0 Diablo\ II\ Complete\ Edition.iso)
Install game as usual EXCEPT for setting up a virtual desktop
Go to Configure; set Arguments to -w
This will start Diablo II in WINDOW-MODE rather than fullscreen mode
Go to Configure → Display and set Direct Draw Renderer to gdi
Additional Information:
Menu was a little laggy for me. In game was full speed, you can change options in game and select between 640x480 and 800x600 resolution, both work fine.
There are some more tweeks like shadow and overall quality which can be tweaked if the game is to slow, but I haven't seen any slowdowns yet.
Videos don't seem to work or else the game would run perfect.
Upon first start make sure to select software 2D rendering. You can change GPU settings if you run the program V2VidTst.exe in the Diablo II game folder.