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The window is tiny because you are using the default resolution (320x200).

Try switching to Direct3D. In AGSEdit, compile the game (press F7).
Open the game folder with Windows Explorer, run winsetup.exe.
Change the graphics driver to Direct3D, make sure "run in a window" is checked, activate the x2 or x3 filter to get a bigger window and try again.

Also make sure you have the latest version of DirectX9, 9.0c. Win7 is shipped with DirectX10/11 and an obsolete version of DirectX9 (to run old games).

If nothing works, you aren't the only with Win7/64bit having this problem. People had to resort to using a virtual XP machine.

Your like some sort of crazy adventure game programming wizard! Switching to Direct 3D and changing the filter sorted the cursor problem aswell as the size issue. Your the man! Thanks so much.

When trying to run my first room in the editor the walk cursor is static and will not move with my mouse, also the screen is tiny (not sure if thats the way its ment to be?) Im running Windows 7 64bit i7. Any help would be great!