Your error log indicates that the game loaded correctly and that there are no obvious problems with your graphics. The resolution is fine.
I think you just don't have daytona2.zip in the same folder as Supermodel. I'm assuming that to run it in windowed mode, you are dragging daytona2.zip onto Supermodel.exe, is that correct? See the Help section of the web site and notice where I place scud.zip (in c:\Supermodel, which I assume is where you extracted the emulator to).