Thanks for the help! It does appear to be a shader issue as I see this in red letters in the log:

"<Driver3D_DX9::LoadShaders 1182> LoadShader "ps_normal_ext" failed."

I'll go ahead and post a thread per your suggestion.

I need help. First is when the installation finish it says type down DAGGER to start, but do you have to space between the C:\Dagger> and then type C: and press ENTER cause that's how I went. But that's not where the trouble begins. As I press play on the XL Engine Launcher and reach to the Main Menu no music or sound is heard when creating a character or even clicking! Only music when your in the dungeon and enemies screams (only the rats I suppose.) But also when picking your class there is only few choices and all of them are only magika related like they were deleted from the selections(Battlemage, Conjurer, etc)! I'm confused I was to able to pick whatever like Warrior or Barbarian. Please help.

For those of you wondering about the Daggerfall Installer, I read elsewhere in the forums that the Eye of Argonia mod makes DaggerXL crash, so at the very least disable that.

Actually that wasn't the case. It was just a differently packaged .exe that one of the installers had.