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To run either DDO or LOTRO launch them from outside Steam.
This guy is a LOTRO wizard, listen to him. xD I think when you download it from Steam, it puts a shortcut on your desktop, maybe try launching it from there?
1 - Update the Steam client. Quit the steam client from the system tray icon & start it again. When there's pending updates, this will trigger an update.
2 - Install LotRO using the download from lotro.com. As there are no Steam achievements or anything, you won't miss a thing. (Well, except for that ghastly overlay thingy that only interferes with games, and the possibility to use your Steam wallet to buy TP)
Clearing the local cache may help as well from what I've heard, but I have no idea how you do that or where you can find it.
I don't know Steam well enough to tell you how to do it, but it sounds like the launcher link IN STEAM is broken/corrupt and needs to be replaced.
The client is in Program Files/Steam/SteamApps/common/Lord of the RIngs/
Try launching from there directly.