Hmm, look at that. Same problem. I just copied AudioSurf to my living room computer (using Steam's backup games function, then restored it here). I get this same error, then a prompt to install a Quest3D viewer package/update.
However, my exact error is:
Quest3D Error
A channel that is needed for this project was not found in the installation path: C512AF40-200E-4F42-97B3-E48B8210D964
[OK]
Followed by:
Quest3D Update & Install
There was an error while loading this project. You might need to update your viewers pacakge (
ed. note: yes, it's misspelled like this)
Would you like to download the latest version?
[Yes] [No]
This computer has pretty trashy specs. I might try popping a newer video card in to see if it'll help.
Pentium 4, 1.7GHz, 512mb RAM, i845GE chipset w/ onboard video. nVidia GeForce2 GTS, 64mb.
DxDiag (give me a break, I don't need to post that, lol) tells me it's Direct3D capable with AGP Texture Acceleration. That's pretty much all that's ever necessary for most simple games, far as I understand.
Ideas?

edit: Well I'll be damned. Restarting Steam seems to fix a lot of problems. Wouldn't've thought restarting the DRM controller would solve so many problems

(It works now, and incredibly enough, it runs on my crappy 10-year-old video card just as well as my '8400GS in my main computer. Wow. Well, I guess that error message is now searchable...)