I get a very similar problem. I have Win 7.
I'm not very great with computers, so any help would be greatly appreciated.
I didn't do anything fancy at all. (monitors, joysticks, mods, etc) Tried installing 1.0 to the default directory, then installed the 1.0.2. patch... going to the options menu didnt work at all, and i constantly got the same error message described above. whats the next step, install straight to C:???
thanks guys.. love this game, but this patch is driving me nuts.