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The problem seem to be linked to "atimgpud.DLL" which is known for causing issues on different games if it got corrupted.
Ignore this post
A friend of mine had the same problem...
http://steamcommunity.com/app/91310/discussions/0/846947320656771753/
I've been trying those suggestions without success.
Tried both those without success. The Locale line was actually "En". I changed anyway but no difference.
One thing that keeps happening is it keeps opening in a window. If i go to the Video file in Settings in Documents and change the resolution to 1600,900 it goes to full screen but still black. Then periodically it will revert back to 1280,720.
Have you tired this yet? Sound like a good advice.
I've gone to the NVIDIA control panel and selected customised settings for DeadIsland but the options are 'Use Global settings (Autoselect: Nvidia GPU)' or 'High Performance Nvidia Processor' or 'Intregrated Graphics'
I've tried all these options but no difference.
http://steamcommunity.com/app/91310/discussions/0/810920962526949169/
They mention a few possible workarounds, and the OP problem sound like yours (he tried the things you tried too) and found a solution (in his case it was installing the game in the default steam folder instead of on his other library on a second drive) There are also a few other suggestions in there. Good luck!
Stupid forums... sorry again.
I'm running Windows 8. Could that be a problem?