Very strange issue, indeed. But I finally got it working after 6 hours of problem solving (I suck at this stuff...) What I did was a system restore and reverted back to a prior point of windows 7. I didn't lose much because I had only installed windows 7 the day before.
Anyhow, I reverted back to when I first installed steam. But once I clicked it, it didn't work, so I had to get another fresh install of the game. Then I reinstalled Race 07. Miraculously the game finally launched once I started it from steam (not the desktop). Sicne I'm now at work I haven't had the time to fiddle aroudn with it since, but it would seem the problem has been solved.
Don't know what I could have downloaded between my initial install of steam to the point in which I got that mysterious error, but the system refresh must have done something to correct the issue.
Also, it should be noted that the EXACT error code I got, which is (0xf,0x18fce8), has practically nothing on how to fix it, and I don't think the .dll overlap has anything to do with it, which works with error code (0xf,0x12fc74). Somewhere along the way in my trolling through countless pages I found that doing a system reset might work, but I didn't bother to try it until I was completely out of options. But, again, I wouldn't know where to reset to if you've had windows installed for a long period of time. My only suggestion would be to find a point where steam wasn't installed and go from there.
Hope that helps anyone who runs into this issue. I still don't understand it, as this all happened on a freshly built computer and a newly installed copy of windows 7... And it's stupid, because out of all the issues I've had putting this stuff together, this has been the most time consuming...
