You must have a DX 7 Card or something, Windows has DirectX 9.0c w/ Support for 3.0, but your GPU doesn't necessarily support this! If it's not a laptop, run out and buy a new GPU, Budget = Geforce 8600\Radeon HD 3850 (by budget, i mean lowest possible price for this power!
Intel Cards are not in any shape to support XNA, there are a select few that do, but if you have an Intel or a Low-End GPU Purchase Geforce 8600\Radeon HD 3850 also GeForce 4MX\GO Series are not for XNA Either!
Also about the OLD HLSL Compiler, is there way we can insert this newer ones in the tool chain?
My New PC:Intel Core 2 Q6600 2.4ghz\4GB Ram\GeForce 8500GT @ 512MB\ 720GB HDD (325\335 2 partitions)-float Sink; <- the game programmers oxymoron