FYI,
I don't see a general discussions forum, so I'm posting under the card I have.
I've just discovered that having "Virtual Machine Network Services" enabled on my network adapter is causing the "API Init error" issue to appear for me.
I'm not declaring that this is the only cause for this, but if you're seeing this on your machine, you may wish to verify if you're running VMNS. This would be anyone who has Virtual Server 2005 installed on their machine (and possibly Hyper-V. Someone may wish to verify if Hyper-V uses VMNS as well)
My machine is Vista SP1 x64 with 6GB or RAM.