Mate I'm on Win7 and don't have Steam version of the game. Everything is working fine. Just do as I say.
Install the game and patch, copy a crack (YES you will probably need this unfortunately if you want to play in Wide resolutions.) . Use UNIWS and patch the game, install Wide Screen Fix and change in swkotor2.ini resolutions to ones you want also set FullScreen=1. New resolution will be set automatically. It WILL work, no other option.
And no, there are no HQ movies for K1.