Removed that MS update and it solved the CD-check issues with the older Civ4 versions (and other games) but did nothing for the .ini file weirdness. That's going been going for me on since well before that MS update got released. No amount of ticking boxes or reinstalling the game fixes it. (though I've not tried reinstalling the game outside of the default location, but I can't be arsed with that right now - perhaps you could try that bhinso)
Also been talking about it here: http://forums.civfanatics.com/showthread.php?t=557707
Also been talking about it here: http://forums.civfanatics.com/showthread.php?t=557707