Well unfortunately I don't know how to fix your crashing problem, sorry.
But I will tell you that your video card drivers are not out of date, in fact they are better than the ones the game was intended to be played on when it was originally released.
These are my system specs:
MODEL: 15.6" HP Pavilion dv6 Notebook PC
OS: 64-bit Windows 7 Home Premium, Service Pack 1
PROCESSOR: AMD A8-3500M APU
GRAPHICS: Radeon HD 6620G 1.5 GHz
MEMORY: 640GB HDD
When I do a system scan it says that my video drivers are out of date too, yet I am able to run KotOR at maximum graphics (Screen Resolution 1024x768 @ 60Hz, Shadows and Grass, High Texture Quality, 8 Sample AA, Anisotropy - 16X, Frame Buffer Effects, and Soft Shadows) with high FPS and my laptop runs hot, but not too hot.
Your computer has a better OS, processor, and graphics than mine so if I can run the game with ease then you should be able to as well I think. I wish I had more info for you, but hopefully someone else can help you out more.