I'm suffering this problem too, with a Radeon 200M video adaptor on vista. The directx update was initially cancelled, which may or may not be part of the problem.
I had no issues with Ep1, but if i restart steam I can get Ep2 to run once, but unfortunately only text renders, no images or 3d graphics. Trying to launch again results in the error code mentioned above. The main menu is vageuly usable, but its just a black screen in-game. Have tried re-downloading, etc to no avail.
Cross-linking against similar thread on steampowered.com forums here: http://forums.steampowered.com/forum...d.php?t=856706