Ugh, I'm having the same problem...
I also grabbed an ISO initially to check the game out (I don't trust demos anymore since Black & White), and couldn't make it work, so I had to go by the demo and my experience with <img src="/ubbthreads/images/graemlins/div.gif" alt="" /> (another game I downloaded, made it to the second town, then bought it), and decided to buy it.
I brought it home, and did all of the following:
1. Uninstalled the pirate copy.
2. Installed my new, legit copy.
3. Rebooted like it told me to.
4. One of my friends pointed out that some games blacklist Alcohol 120%, so I uninstalled Alcohol 120% just in case.  Another reboot to finish the uninstall. (WTF am I supposed to do without my CD backup software if a disc gets scratched, BTW?)
5. Also disconnected one of my CD drives (the drive that started not recognizing discs around the last time I installed a StarForce protected game), in case it was trying to read from the wrong drive.
6. Then I uninstalled the game and reinstalled from the other drive just in case.
Now, I still get a "Disc Identification Error".
I can post my report.txt if it's requested, but I might have to censor it a bit, I don't see home my machine name, username, and what all is on my start menu is pertinent at all... <img src="/ubbthreads/images/graemlins/question.gif" alt="" />