Well, the log created when using the -d3ddebug param was not as helpful as I thought it would be. Perhaps we could take a different approach: Could you try to re-install the DirectX End-User Runtimes (June 2010)? The DirectX redist can be found in the Unreal Engine install folder but, to be on the safe side, could you download it from here:
When you get the directx_jun2010_redist.exe, it will have you extract the files. Navigate to the folder you extracted to and run DXSETUP.exe. Once the install is done, try to launch Unreal Engine again.
If this does not work, I may have you create a log using DependencyWalker to see if we can spot any issues there. The basic steps are outlined here if you want to get a head start(See Using Dependency Walker section):