Furnace defaults to software renderer, broken intro, DX11 doesn't work

[freq-mod]

OS: Windows 7 SP1 x64 CPU: Intel Core 2 Duo T7300 GPU: Intel GMA 965

When trying to run furnace for the firtst time, program fails to open with a message: 'could not init renderer! failing back to software renderer, please restart furnace' . Doing so runs the program, but intro is horrifyingly broken, scaling of object is off, some object don't even load properly, its all over. And software renderer is very ugly, so I would want to switch to DX11. dxdiag reports DX11 is supported, but furnace resets to soft renderer on the next startup.