Well, this is what i did (and it works like a charm).
Check "C:\Windows\System32\drivers" location for the file "nvlddmkm.sys". If it is NOT there that's why you have this problem. What you need to do is this: go to the location where Nvidia setup extracts driver files (most cases its c:\NVIDIA) and search for file nvlddmkm.sy_.
Copy this file somewhere that is easily navigated on your hard drive (i just put mine on c:\) and go start-run-cmd. This will show you command prompt window. Navigate to c:\ (root) and execute this command: extract nvlddmkm.sy_ nvlddmkm.sys. This should create file "nvlddmkm.sys" which you then copy to "C:\Windows\System32\drivers".
That did it for me.
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