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If I rename the video folder the game exe will not crash but you are just left with a black screen, So it
must be a codec issue, and i am still unable to view them in widows media but can in vlc,kmplayer. chris
Reading this, I got an idea. I don't have Pathologic installed right now, but as you said the videos are in separate folder and it seems that the problem lies there. What I suggest is replacing the video files with "blank" files (by creating same number of empty notepad documents and renaming them as the video files, extensions included). The game should read them as empty videos which don't need codecs and load itself so you can play it. In case this works, the obvious downside is that you won't be able to see any pre-rendered movies ingame.
I know it's a long shot and annoying work to create the blanks but I hate giving up on such matters
.