If you get this error - 'Failed to initialize the engine', try this:

1: Go into C:\Users\[your username]\Documents\Stronghold Crusader 2 folder
2: Backup options.xml
3: Open options.xml
4: Alter fullscreen="true" to fullscreen="false"
5: Save options.xml

Run the game - seems the -windowed in steam has absolutely no effect on the game window, and that must be changed in the game.