1. Download "dxwnd" from http://sourceforge.net/projects/dxwnd/ unpack it and start dxwnd.exe

2. Right-click on the white space in dxwnd and select "Add". After filling out the empty spaces it should look like this:

You now should be able to play Warrior Within windowed by double-clicking the task in the dxwnd-window.

3. If this is not working yet (and if you're playing on CD-Rom), try downloading a "No CD"-program. ("No CD Prince Of Persia: Warrior Within v1.0 ENG", size: 2.3 MB). After downloading it, replace the POP2.exe of the game with the "POP2.exe" you just downloaded. You now should be able to play Warrior Within without CD - this also made dxwnd work for me.

Edit: I'm on Windows 7 (confirmed: this guide works for CD-Rom and Steam-Version of the game). If you're not on Win7 I can't guarantee that this will work for you.