Hi and welcome to the forums.
Sorry it took a bit to reply, but i am not feeling too well. I am not too good at error logs, but from the looks of it theres a texture corrupt in the LadderFonts.utx file. And its is unrelated to the installation of the S3TC textures. So its a texture alright causing the problem but not due to the S3TC installation.
I guess the most simple solution is simply reinstalling that texture package, so either take it from your CD or grab it from this page:
Stock UT NormalI am pretty sure if you replace that package than your problem is solved. As for how it got damaged, no clue, i guess stuff like that happens once in a while. In a bad case your hardrive might contain a bad sector. I hope not, and its just the file that got damaged somehow.....
But try replace it with a functional oné, and all should be ok again. And its sheer accident it happened while installing the S3TC textures, because those textures should not be able to affect other files in any way.
And its also render independent, UT simply needs that basic file to be able to run, regardless you choose D3D8, D3D9 or OpenGL or for that matter any other renderer. Well let me know if it worked, or if you encountered other problems.
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