Why can't diablo 2 be installed in windows 7?

You have not specified what is your system configuration. But with the experience I have, you have a problem of compatibility. It looks like you are using 64 bit windows 7 and game is compatible with 32 bit OS. You can check it by installing it on windows xp. If this is your problem then you may do this:

1. Right click on the exe file of the game .

2. In the appeared window, click on "compatibility " view.

3. Then search for mode in there, that must be set to Windows XP SP2/3 mode, and disable desktop composition.

4. Above step allow you to run game, but have lag spike issues. To resolve that, open "task manager", then in service tab, search for "windows media service "(not remember exactly what its name but you can guess it in that list of services).

5. Then right click on it and disable that. Hope, you will have no problem after that. You can run the game exe file successfully.