I'm not going to claim to understand the intricacies of how Win runs a DOS program, or Intel's v86 mode, but I thought that half the stuff was actually virtualized when running a DOS program under Windows, so that the timer isn't the same timer that Windows uses. Maybe I'm wrong.
Be that right or wrong, I can say that my DOS game sets the timer to 600Hz, and like I said it runs fine under Win95 and real DOS.
If the only problem with bosjoh's suggestion is speed, then why don't you draw the image(s) to a video back surface and use page-flipping, which takes about 0% overhead.
I've never heard of a vsync interrupt, except on other systems like the Amiga. If there were such a thing, wouldn't it be used by everyone instead of manually polling for the vsync? Where did you see this info?
Rock