I'm trying to get Nostalgia set up for a friend and they're also hitting this issue. On my machine it's absolutely fine, and I sent him a preconfigured zip (using the data from here as a base) and some simple instructions to get it set up - but unfortunately he's hit this same issue as a roadblock.
I've attached the log from his bootup, and a log from my equivalent working setup. The only notable difference (at least, before the cavalcade of errors begin) is that there are no SoundCtrl log entries, suggesting the subsystem is not initiliasing at all. Additionally,. the errors present are all to do with the registry - where does Nostalgia/Spice write to in reg?
failed_log.txt
success_log.txt