Hey there,
it's been a while and you probably found a way to fix your issue, but I'll post anyway in case it's useful for others.
When I tried installing Warcraft II, I encountered an issue, pop up of a '' can't run in full screen mode. Gotta terminate'', even with dosbox got same problem, tried changing the cmd settings, nothing worked.
What I did to make it run on windows 7 :
step 1 - disable graphic card (control panel) and it made it possible to run the installation without the error pop
step 2 - install the game (downloaded version) and mounted it through DAEMON Tools Lite (it replaces the cd)
step 3 - installed DOSbos 0.74, re-enable the graphic card, reboot pc
step 4 - run DOSbox, make sure the CD drive is mounted (through DAEMON),
type in (well, whatever your cd drive is)
" mount g g:/ -t cdrom " enter
" mount c c:/war2 " enter (this has to be the drive where you installed the game)
" c:/war2 " enter
"war2 " enter
and then for full screen : hit Atl + Enter = then you got your Warcraft II running under Windows 7 without too much fuzz, without installing a virtual machine.
Hope it helps.