Hi everyone!
Thought I just saw nowhere mentioned those fixes and decide to run a topic about them here.

First one! Install Shield 5 the official 32-bit compatible version
Solves the problem with installation where 16-bit application can't start. Found it in ReactOS forums. Solved same issue I had trying to install Kao The Kangaroo, Then tested it with worms and game installed perfectly fine.

Tested on windows xp sp3 with worms armageddon 1.05E and 3.00U Hasbro.
Extract Is5Launcher.zip somewhere, Setup.exe will appear.
This setup exe is install shield but 32-bit version which is later released and works on XP.
Copy your disc to the pc, the navigate to the folder where you copied it and enter in Install directory, where Install.exe is.
Place setup.exe there and run it. Worms should install with no problem.
Delete the copied installation from your drive.
Leave the cd in your drive and play now!

Source: http://www.reactos.org/forum/viewtopic.php?p=90351
Link: http://toastytech.com/files/Is5Launcher.zip

Second one! ddwrapper by Aqrit (source available)
Solves the issues with slowness and color issues, it is a ddraw proxy which increase the compatibility of ddraw applications with simulate some of the functions that newer windows ddraw api can't provide. It should work on windows7 and windows8 as well.
This wrapper does NOT provides windowed mode. Also it is not recommended to run it with wormkit windowed module, since using two wrappers can mess the things.

As you have your game installed and updated to 3.7.0.0, extract ddwrapper.zip somewhere.
Open aqrit.cfg with notepad and follow the reference on the site, if you got color palette issues, change colorfix from 0 to 1, then save. You also can try to set the program to work on single processor with changing singleprocaffinity or if the game runs too fast change the fakevsync settings.
Copy both aqrit.cfg and ddraw.dll to worms armageddon directory.

Source: http://bitpatch.com/ddwrapper.html
Link: http://bitpatch.com/downloads/ddwrapper.zip

Hope someone to find these useful! ;)

What would be the advantage of using ddwrapper over the other graphics APIs?

The answer is: Fun

Useful someone's finally figured out getting the installer working on 64-bit XP, though (just as everyone's stopped using it...). I'm sure someone will find a use for it, so thanks :)

@CyberShadow
I don't know actually,a chance for even better ddraw, not sure, since nobody will use it if they have supported directx8/9/etc, so the answer is: No advantage, I posted it mostly because some people might find it interesting, the project seems good, also it helps many old games like dungeon keeper 1 or tiberiam sun to newer windows systems.
Fun - thats the second answer! ;)

I think the only useful function for WA here is FPS and "ForceDirectDrawEmulation", which is btw already included in the latest 3.7.0.0 update as a Compatibility fix for DirectDraw in Advanced Settings, as well as a vsync control, so no much use of the wrapper...