After my re-installation, it still wasn't working - exact same problem. I even deleted the directory (didn't have any active UI files anyways). Running without sound also did not make a difference. I was out most of the day so now that it's evening I'll try the SP3 update when time (and baby) allows
By the way, where do I put the "windowedmode=TRUE" in the eqclient.ini and is that the correct form? It wasn't there so I dropped it in the first section.