exactly the same problems, nothing worked; pretty much gave up until recently...
However, I tried deleting the entire Localization folder.
Then in Binaries-Win32 (DD folder), I ticked all the settings (256 colours - high DPI settings) in compatibility and ran DungeonDefenders.exe in Windows XP Service Pack 2.
Then, after saving all those settings, I tried running DunDefGame.exe a few times. And hey presto, it worked!
Not sure why or how but it seems to be running now, so no complaints from me. Hopefully some others will read this & pass it on
if it works for them =)