I was receiving the same error when I tried to play. I was also getting a message in the steam window that read "download starting...." but never saw a download actually happen. In my case it had to do with my hard drive being a FAT32 format instead of an NTFS.

Check to see what file system you're using if it's FAT32 take a look at the link below.

http://forums.steampowered.com/forum...d.php?t=816819

The instructions say "for vista users" but I have XP and still followed them and got the downloads done and the game working.