The card is running at stock speed (not OC'd). It is even harder to solve the problem when you have to reboot everytime you play the game. Because I thought these features might have something to do with it, I turned everything off and it still locks. The game will lock when changing anti-aliasing and anisotropic filter settings before it even starts. It will lock up at random times, either while loading a game or playing a movie (which means it changes screen resolution). The card works fine in all other games (Oblivion, Half Life 2, etc), but KOTOR 2 keeps locking. I recently upgraded my video card from a Nvidia 6800 AGP to a Sapphire ATI x1950PRO AGP card.
I am currently nearing the end of the game. I have been playing KOTOR 2 for a long time with never a crash.