Hi im having the same problem but sadly adding the registry keys haven't fixed the problem (i added the keys to both HKEY_LOCAL_MACHINE\SOFTWARE\ and HKEY_LOCAL_MACHINE\SOFTWARE\Wow6432Node) for KOTOR 2.
I don't have KOTOR 1 installed.
The editor only asks for the KOTOR folder but then it throws an error and quits.
My path is: K:\Steam\steamapps\common\Knights of the Old Republic II
I have restarted several times since the registry editing and the KOTOR Tool ist working.