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I also gor around the problem by creating an MPEG-2 of my project, pulling it into another software program entirely and burning the cd from there. No problem but a huge hassle.
I just tried installing the latest patch (released yesterday) but unfortunately it made no difference. The problem is exactly as it was.
I installed the latest patch but sadly the error continues.
I have the EXACT same problem and I suspect by the lack of response to your post and the numerous others on this subject that there is no fix. I've read almost a dozen posts on it, most with variations of this problem - some people for example report getting to 85% or having difficulties actually burning. I have the same problem as you do - when I click the 'create disc' menu option it gets to 5% and gives me the initialization error and says items may not have installed properly.

In response to everything I have read I have tried the following:

1. Uninstall and reinstall PD7
2. Disable all antivirus, firewall, etc
3. Remove patch and reinstall
4. Trying a basic project with only 1 picture or movie clip
5. Different PC's (mine has Vista, tried one with clean XP -SP3 install)

My question - is Cuberlink working on a patch for this and if so what is the timeline? Is there a workaround to burn my project another way? I can produce the movie okay as MPG-2 but I want a proper DVD with chapters etc. I spent hours making the project and it would be gutting not to be able to get a DVD from it.

Would really appreciate any advice people can offer.
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