Open up swdirsXbox.ini (it's in your base kotor 2 directory) and change it to look like this- (anything that says f:\games\KotORII\ needs to be switched to your kotor 2 directory)

[Alias]
HD0=f:\games\KotORII\
OVERRIDE=f:\games\KotORII\Override
ERRORTEX=f:\games\KotORII\Errortex
TEMP=z:\Temp
MODULES=f:\games\KotORII\Modules
LOGS=t:\Logs
LOCALVAULT=f:\games\KotORII\LocalVault
DMVAULT=f:\games\KotORII\DMVault
SERVERVAULT=f:\games\KotORII\ServerVault
STREAMMUSIC=f:\games\KotORII\STREAMMusic
TEMPCLIENT=z:\Tempclient
SAVES=u:\
CURRENTGAME=z:\currentgame
TEXTUREPACKS=f:\games\KotORII\texturepacks
STREAMWAVES=f:\games\KotORII\StreamWaves
GAMEINPROGRESS=z:\GAMEINPROGRESS
REBOOTDATA=z:\rebootdata
LIPS=f:\games\KotORII\Lips