I had the same problem several weeks ago. I too have an Nvidia 9250 w/512MB. The only issue I've noticed is that occasionally I will get dumped out of the KotOR2 program to windows xp for no reason. Its rare, but it does happen, so the way I combat against that is to keep several save games as I go along, that way I don't lose much. I don't know if Nvidia is the cause, but since that is the only thing the install program identified as a problem, perhaps that's it.
The other thing I've noticed is that sometimes running a virus program in the backround causes trouble, so I turn it off while I play, then back on when I'm finished. That helped eliminate stuttering.
Hope this helps.
Mine just crashed when my system decided to do a full on virus check