Cannot run Knytt Underground (full game)

When I attempt to launch the game, the screen goes to black and freezes. I had updated my video drivers to the latest, and I had played around with compatibility settings, though it is supposedly compatible with Windows 7 x64.
There is no error message, just a frozen, black, loading screen that forces me to reset the PC. I'm hoping it is not a hardware compatibility issue, but I cannot rule it out at this point.
Any ideas would be appreciated.
System specs are:
AMD Phenom II quad core CPU
Nvidia GTX 580 3GB
8 GB DDR 2
Windows 7 x64

That video card should run the game.

First thing I would do is remove the game and reinstall it. Also, if this happen, can you not use CTRL-ALT-DEL to access the taskmanager and kill the game like that? If your pc really hangs at this point where accessing the taskmanager is not possible, then you could be having a software/hardware problem.

Also make sure you are not running any kind of firewall, such as avast.

I had actually attempted uninstall / reinstall of the game already to no avail. I have, per your advice LPChip, disabled my firewall. Still  a no-go. Alas my computer really does completely hang to where the keyboard becomes unresponsive thus rendering task manager inaccessible.

What does your eventlog says?

The only unrecognized errors reported are..
Application popup          Driver atksgt.sys has been blocked from loading

DistributedCOM              The application-specific permission settings do not grant Local Launch permission for the COM Server application with CLSID
                                      {C97FCC79-E628-407D-AE68-A06AD6D8B4D1}
                                       and APPID
                                      {344ED43D-D086-4961-86A6-1106F4ACAD9B}
                                       to the user NT AUTHORITY\SYSTEM SID (S-1-5-18) from address LocalHost (Using LRPC). This security permission can be modified using the Component Services administrative tool.

You can ignore this error. Its part of Tagas copy protection used in games such as Act of War.

I suppose the Event Log you've got there is right after the reset. Do you have logs from just before it?

Unfortunately, no. This is my only system event log.
The log was fairly extensive, so I cleared the log and attempted to launch the game in an effort to determine what errors would appear
from this. unfortunately the only errors that did appear were related to Tagas, and a couple of Steam timeouts. I thought for sure that something
related to the Knytt would appear, it did not.

The game can take a while to load, and its loading screen is just white text on a black background, so it might be possible the game is loading but not displaying the text? If you haven't tried waiting 10 minutes after the freeze occurs, I'd suggest that.

Otherwise, there's an alternate build of the game made in MMF2 rather than Chowdren, which has slightly slower room loading times. You could replace the game executable with this one and see if it works then.

Also, you can try the infinity hype update. It fixes certain crashes with intel based cards.

Eureka, it launches. The MMF2 executable did the trick. I sincerely thank you all for your time and effort in solving this problem.
Thank you sergiocornaga for recommending the MMF2 build. Now as soon as I get a day off, I'll surely enjoy this fantastic game!

Now as soon as I get a day off, I'll surely enjoy this fantastic game!

I can guess who's gonna call in sick tomorrow.