With the User Accout Control, check out this site:
Go down to Method 4, which is doing it via the Control Panel.
As for permissions with the folder, I'll have to look in to this when I get home tomorrow afternoon. You have to right click the folder and go in to properties, and go from there.
I disabled the UAC, unsurprisingly KOTOR 2 still wont load, I still get that program must close because of error message. I found the permissions thing in the properties tab but I dont know how to proceed from there.
Edit: I managed to get the game working finally, not sure how long its gonna last. When I disabled the UAC I tried to extract the patch for the vista update and it worked this time and when I replaced the file the game was able to launch sucessfully. I also used win xp sp 2 compatibility mode.