You ought to be able to start the program without steam.
Check where steam says the "app" is installed, quit steam and navigate to the installation folder with your file manager / Windows Explorer. Check if you can simply run the game, by double clicking the CW2.exe binary. If steam has installed CW2 underneath 'C:\Program Files\Steam...' you might want to consider having steam move the 'app' to a new disk. This would take the Windows constraints on manipulating and editing files underneath 'C:\Program Files'. Once done, right click CW2.exe, seletect properties, compatibility tab, Privilege Level - and check 'Run this program as an administrator'.
It seems very unlikely to me, the installation might be defective. Once installed, the only files the game changes are under Settings, and Saves.
If the program cannot access files, which are there and available to be read, the issue is likely not the files, but the system attempting to access them.
If you run out of RAM and try to start a new program, Windows will page out (move the data from the memory space used by windows to run a program, which is not actually actively running at that point in time, to the page file, and them free up the memory.
It might be that this paging process is taking so long, that CW2.exe gives up and simply says it cannot read the file, if it is waiting for memory to free-up, but it is taking too long.