Possibly, they changed how text was drawn between DirectX 2 and DirectX 5, it's entirely possible that other stuff could have changed. Large icons on the desktop should always appear at a minimum, at least with DX2 and 5, as they are drawn in software. Windows includes a generic S3 764 driver also, so that's another option.
No desktop icons appear unfortunately. I don't see a generic S3 764 driver here in Windows, but I do have a driver called just "S3", which is the first driver in the list under the "S3" manufacturer list, so I'll give this a go and see what happens, otherwise I'll install Windows 95 again and not update DirectX as I cannot uninstall it.