Vista Home Basic does come with a cut down DWM (no flip3d or blur) and a cut down Aero theme.
Yes indeed, it does or I wouldn't be able to enjoy DeskScapes.I got the same error when I tried to update to v2.00.058 while using WB's. The latest version( 2.50.069 ) runs just fine on my Home Basic rig with WindowBlinds applied.
Try unloading WindowBlinds(apply the Windows Aero WB) then go to Control Panel\ Appearance and Personalization\Customize Colors and click on"Open classic appearance properties for more options" You will see Windows Vista Standard;Windows Vista Basic;Windows Standard,etc. Make sure Vista Standard is selected.Try running DeskScapes.
This is what it took for me to not get a DWM error with .058 but as I've stated,the latest build of WB's and DS do work together on my HP.It's not a fix but maybe it will give some clues as to what is happening.