For those who have had trouble with Kotor Tool not detecting the path of TSL or Kotor and your using the steam version, here is how to enter the registry key manually.
1. Open regedit
2. Navigate to HKEY_LOCAL_MACHINE\SOFTWARE\ on 32 Bit Windows, or HKEY_LOCAL_MACHINE\SOFTWARE\Wow6432Node on 64 Bit Windows.
3. Add Key: "LucasArts" (no quotes)
4. Add Key to LucasArts Key: "KotOR2" (no quotes)
5. Add String Value to KotOR2 Key: "Path" (no quotes) with data set to "C:\Program Files\Steam\steamapps\common\Knights of the Old Republic II\" (no quotes) on 32-bit Windows, "C:\Program Files (x86)\Steam\steamapps\common\Knights of the Old Republic II\" on 64-bit windows.
(Above are the default locations. If you installed the game/Steam elsewhere, use their path instead!)