If you disable Direct3D9 support, then Inner Space isn't going to be able to do anything for you in the game, as you've discovered, so while that confirms that your issue is video-related, it doesn't help you get it working
In all likelihood, your problems are solved by installing current video card drivers (as Shark7 has discovered). That's really about all there is to it, including for your brother's laptop. The blurred text issue sounds like an issue that people have had in years past with outdated NVIDIA video drivers, and it also involved lagging the game quite a bit. The solution for that was to uninstall the NVIDIA video drivers, reboot, and install the drivers again from a fresh download.
Also, some laptops use Intel or other non-ATI/NVIDIA video chipsets, many of which simply are not compatible with Inner Space for various reasons (though I believe the vast majority of new hardware sold in the last few years should be compatible). Typically this is apparent by simply viewing the IS uplink window (e.g. select Configuration from the IS menu) and if it looks fine, then IS should work in games as well