Getting Runtime Errors when local processing occurs

Hmm... You are running a 64-bit Windows machine, right? The log simply shows that Blender immediately crashes after starting.

http://www.renderfarm.fi/blender

Could you try downloading the Renderfarm.fi Blender and try starting it? 

Here are some thoughts:

I've got an environment variable for pythonpath=C:\Python26\;C:\Python26\DLLs\;C:\Python26\Lib\;C:\Python26\Lib\lib-tk;.  That's for 2.49 64 bit.

When I run 64 bit 2.5x versions of blender, I run them with the blender.bat solution so that they don't look at that global environment variable. 

Maybe the latter is causing this?  Because a direct call to the blender .exe will just crash.  Do I need to associate all .blend files with the renderfarm.fi version?

And do I need to place the renderfarm version is a specific place?

Thanks!

That seems somewhat unlikely as Python 3.1 libs are bundled to the client. You could try removing the path variables entirely (for testing at least) and see what happens. Blender should work without any Python installed on the computer anyway. If the Renderfarm.fi Blender starts after this, then the environment variables might have something to do with it.

You simply unzip the package and start the executable. Everything is located inside the .zip, and Blender can be located anywhere on your computer. You don't have to associate all files with the Renderfarm.fi version.