Deadman, you sure you have 'Use Direct3D Accelleration' checked?
I actually own TM2 for PC, so after reading this I dug up my CD and tested. Annoying the Installer wont run under Win7 64-bit, but copying the entire CD to the HD and running TW2.exe directly works. The max resolution it allows me to use is 800x600x16bit.
For me it running at the exact same speed as playing on the PS2. I'm betting using the emulator and rom lets you use higher resolutions and you can probably tweak it to run faster than the original PS/PS2 speed.
Amusingly at the vehicle selection screen the cars spin so fast they are a blur. Also load times are instant. Sony should remake this game in a modern engine, resisting the urge to change anything other than upgraded graphics.