try installing openal
rename the unreal2\system\openal32.dll to backupopenal32.dll

do you have a 0warnerr.txt ? and unreal2.txt
post them here

I would try downgrading even more. The drivers that worked best for me were the 29.42.

There is some disagreement on these boards but for my money with a board of that age I wouldn't recommend going with anything other than detonator drivers, the latest being these here:

http://www.nvidia.com/object/winxp-2k_45.23

http://www.nvidia.com/object/win9x_45.23.html

Read thread closer guys. He revived his ancient thread to tell us he's still having problems even though he is now on a XP notebook using a geforce GT 640.

Well, maybe he is using cracked version of the game.
Strange, Unreal 2 is working for me w/o trouble with 2 videocards - Radeon X850 and Radeon HD 2600 Pro...