WTF! I'm having the same problem now too! The difference is my VC used to work until I uninstalled it. Then I smashed my geforcefx 5200 with a hammer because I felt violated everytime I used it and bought a 9800 pro.

I know my cds work because I can reinstall the game but it just won't boot. WTF?

It worked fine before! Arrrrgh.
I've pretty much taken the same steps as Watts did with the same results, no VC! Anyone have any other ideas? (before resorting to rockstar tech support)
my specs, in case it helps
AMD 1600xp
512 ram
ati radeon 9800 pro
SB audigy gamer
memorex cdrw 52x24x52