Sounds like its trying to copy-protect by checking the disc in drive C. Since C is the hard drive, its failing. Simplest answer would be to download a no-cd patch for IWD2.
www.gamecopyworld.com probably have one.
Other than that, searching the .ini files in the IWD2 directory, and failing that the registry , should turn up something that controls what drive it looks at. And if all that fails, reinstalling the game should fix it.