For what it's worth, upgrading to 5.2 does allow you to get past the initial character creation screen.
Unfortunately, later gameplay is somewhat choppy (in places, possibly even unplayable) in the 5.2 drivers. 4.11 drivers are known to be much smoother with KOTOR 1 and KOTOR 2, but that initial video sequence seems to lock up with them installed.
To my knowledge, only the initial video sequence is affected like this, so you could potentially create a character using drivers 5.2, then resume that character with drivers 4.11. (Or possibly just disable video sequences until past the first video sequence.)