The below "fix" has worked for quite a few people at the LucastArts board.
This is not intermittent - it is 100% repeatable.
I figured out Super DVD Creator 5 was causing the 1/3 progress bar crash on my system. I dug a little deeper and figured out that this program installs a few dlls in windows\system32, among them wnaspi32.dll.
When this file is in windows\system32, KotOR2 crashes. Otherwise, KotOR2 runs fine.
wnaspi32.dll v1.0.0.0 21504 bytes, 2003-04-08 19:39
Steph