Well this is very good turn of events
The game works and no, not rigged or a slight chance of Luck. I found the answers and pieced them one by one together to make it run smoothly. Also just for people who do not know, I am running the game on Vista Premuim with a 7900 gs Nividia card, 4GB ram, 2 duo processors on a dell XPS 410
So here is what I did:
1) Re-installed KOTOR 2 with servicepack 2 on
2) I try to play the game and a runtime error comes up
3) Then I installed the 1,0b patch, the game says I need to insert original disc.
4) I contact firstname.lastname@example.org
that deals with discs not reading correctly.
5) They give me a newer swkotor2.exe
6) I name the old swkotor2.exe to swkotor2.old and I put in the new one that email@example.com
7) Game says it has stopped working
8) Last step and the easiest step, I replace the old mss32.dll with the newer one I found at Lucasarts Technical Support.com and the game runs great!
NOTE: I checked, rechecked, and double checked to make sure this really would work and it does! I also made sure that the gameplay and the sutscenes work too and yes, they work fine
So I fixed it, hopefully someone else finds this useful if they happen to come across this thread.