Actually, if you have Kotor 2 box with you, supported graphics card might put something like following:
Radeon X300, X600, X700, X800.
Believe that yours is X1800. Helps to have a graphics card that is supported with game. Otherwise, your other system settings generally exceed minimum requirements of K2 by quite a bit. Just my suggestion, but could be due to that which is why game might not be able to run during some parts, especially where running CG movies are involved. Might be why warning message appears.
Has this happened before, or is this first time?