Okay, so I think I understand why it's all messed up.
First of all, this is a VERY interesting forum post because it's one of those things you never think will matter until it does. Your GPU (dedicated, integrated, whatever it may be) isn't the issue. At least, I don't know for sure about the executable. But, I do know one thing for a fact. Blitz3D is trying to set the game to run in a resolution with only 16-bit color, while Windows (or maybe it is actually the GPU) doesn't like that and doesn't let it set your monitor's color depth to 16 bits. Thus leading to Blitz complaining about "Failed to create graphics."
If you open up the source, the first line is where we get our issue.
If you want to play the game windowed (my preferred method so I can avoid the game hard crashing and locking up, then having to grab Task Manager or SuperF4 to kill the process), change the 1 to a 2 (so the command is ). If you want to still play it fullscreen, change the 16 to a 0 (). This tells Blitz to get the best color-depth for the given resolution, or something to that effect. I'm leaving the resolution as 640x480 because the game was made for this resolution, and once you change it, stuff doesn't line up anymore. You might be able to set the last number as 3 and have it work in a fullscreen-type mode, but I'm not brushed up on this. The reason why it would launch in windowed mode while it was zero is explained in the manual:
I don't know why modern graphics cards can't just emulate a lower color depth. Compared to raytracing, emulating a lower color depth can be done super simply; just before converting to an analog signal. At worst, it's a post-process shader. Oh well, you can't win them all.
Going back to some other stuff, I think there might be a way you can "pack" DLL files into an exe, but it's complicated and the internet might not let you get away with it for free (like you, I am also a cheapskate, so I know how it is), so you'll have to copy the DLLs to the directory where the executable is. Although clunky and seemingly counterintuitive, it's completely a-okay to do this. As for the shadows being broken... without more research (I came across this post like two hours ago and decided to tackle it, and it's about midnight so I'm about to call it for the night), I have no clue. I think I know how it's drawing shadows (using a sort-of normal method), but I don't know for sure, so I'll just keep quiet about the matter and investigate it at a future date.
Anyway, my eyes are burning from the pure white background on itch.io, so I'm gonna finish this up for now. I hope this comment helps you at all and lmk if anything else happens or if you need me to clarify something. Happy blitzing!