I've done these so far (acording to the steam help threads) and tried the game again after each one:
Restart Steam.
Restart PC.
Force Steam to remake ClientRegistry.blob.
Force Steam to re-update itself by deleting everything but Steam.exe and the steamapps folder.
Checked nothing is set to read only.
Verified the game's cache files.
Updated my video card drivers to the newest version.
Start the game from the .exe in the steamapps folder.
Try compatibility mode on the .exe in the steamapps folder.
Nothing fixes the issue. Looks like steam will not allow 2 instances of the game to be running simultaneously which is puzzling given that for 18 months you've been able to do this. Cannot start a multiplayer server then start the game on the same box (or vice versa).
