OK, John, the batch file shows your application is from pre-XP era, meant to be run on Win95 and NT environments. As such I believe there's no way to set it up so it could be run on Windows 7 or make it run faster and better on XP Mode.
You could try to install XP on VirtualBox instead of using XP Mode. Some older legacy applications run better on VirtualBox virtual machines than on same OS (XP) on Virtual PC. Free VirtualBox
download here, you also need an XP install media, CD or ISO.
However, I think the dual boot idea would be the best thing to do.
Let us know what you decide, if the application finally works for you as you wanted.