Thanks to evilone's help, starcraft and Broodwar (and Insurrection) worked after updating battlenet. However, I could not play battlenet. It gave an error:
"Battle.net was unable to properly identify your application version..."
Here are the minimum files required to play the campaign.
I've split them up and linked them using "OptionalAppLinks=*.exe"
compression = fast
--
Starcraft.exe (75.28mb)
maps\
Local.dll
Smackw32.dll
StarCraft.exe
StarDat.mpq
battle.snp
patch_rt.mpq
standard.snp
storm.dll
Starcraft Campaign Editor.exe (1.1mb)
EditLocal.dll
SEditENU.loc
StarEdit.cnt
StarEdit.exe
Brood War.exe (40.25mb)
maps\
BrooDat.mpq
StarCraft.exe
Insurrection.exe (100.4mb)
maps\
--
It be great if optionalapplinks can also detect iso files as virtual cdrom. Then there's no need to mount the iso file first using 3rd party tools.
p.s. "Hey I can see my house from here."