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So, I have Virtual Box on my computer running Windows 7. I booted that up and installed steam, then downloaded and installed Sonic CD. Does not work there either. I'm wondering if it's something to do with my Nvidia Geforce 1050 GTX video or driver? Of course, Vbox does use some of Windows 10. Kind of clueless at this point.
Go to your Steam Directory (wherever you installed the game)>steamapps>common>Sonic CD>directx. In there you will find "DXSetup.exe". I ran that and Sonic CD started to work. I strongly suggest you do a restore point before trying this as I don't know what it may break. Also don't know why it stopped working.
I found a solution that worked for me. Credit to this post on Reddit:
https://www.reddit.com/r/pcgamingtechsupport/comments/vky73k/how_to_fix_the_0xc000007b_error_in_games_ultimate/
Follow step 3, download the file and put all the dll's into the sonic cd root folder.