It first happened when I opened the program. I tried the repair/reinstall and the same message came back. I'm not able to access layer properties, any web functions and the program just seems a bit sluggish. Thanks for the suggestions.
Found the problem. Microsoft's .NET Framework version 2.0 was corrupted (I've never used it) and somehow it caused the acadlt.exe to take the wrong path. I repaired the program (it had caused over 300 bad registry entries) and everything works fine. I really should have known it was in the OS as I've never had any failures using ACAD products.
I solved this issue by starting AutoCAD 2010 while running procmon from Sysinternals ( http://technet.microsoft.com/en-us/sysinternals/bb896645.aspx ). I noticed several errors when AutoCAD tried to read the .NET machine.config file.
I granted "Read" and "Read and Execute" to the local group "Users"
for the file "C:\Windows\Microsoft.NET\Framework\v2.0.50727\CONFIG\machine.config"