Just thought I'd let you know I fixed this issue on my machine about 10 minutes ago.
If you are seeing issues in your Application Event Log ( Start->All Programs->Admin Tools->Event Viewer then expand Windows Logs tree and select Application) which resemble the following:
Activation context generation failed for "C:\Program Files\Baldur's Gate Enhanced Edition\Data\00766\baldur.exe".Error in manifest or policy file "" on line . A component version required by the application conflicts with another component version already active. Conflicting components are:. Component 1: C:\Windows\WinSxS\manifests\x86_microsoft.vc90.crt_1fc8b3b9a1e18e3b_9.0.30729.1_none_e163563597edeada.manifest. Component 2: C:\Windows\WinSxS\manifests\x86_microsoft.vc90.crt_1fc8b3b9a1e18e3b_9.0.30304.0_none_d9c474bda3593bfa.manifest.
Then the below may help.
2)In window that appears type regedit.exe and hit enter
3)Expand Trees to get to the following set of keys:
HKEY_LOCAL_MACHINE/COMPONENTS/WINNERS/HKEY_LOCAL_MACHINE\COMPONENTS\Winners\x86_policy.9.0.microsoft.vc90.crt_***/9.0 where *** represents any string.
4)Copy the current value of the '(Default)' key to a notepad in case you want to revert
5)Copy the name of the highest value from the names of the other keys for example 9.0.30729.6161 is higher than 9.0.30729.5570.
6) Modify the VALUE of the '(Default)' key and paste the name copied in the last step. Hit enter
7) The Default key should now read with a name of '(Default)' Type of REG_SZ and a Data value which is the same as the highest Name value of the other keys.
7) Problem was fixed for me.
Hopefully this will help some people out.