Hey Cougarcat, I tried those without any success. When I tried going into the Users/[username]/Library/Application Support/Steam I didn't see a Steam folder at all which lead me to believe it may have installed onto another partition by accident. I simply created a folder called Steam hoping it would work but to no avail.
I am now deleting the Steam application and starting fresh again. I just hope the problem isn't stemming from a corrupted install which I'm using to backup again.
Very vexing! Argh.
Also, I mentioned this was on 10.7 which is a mistake; it is 10.8.2
UPDATE:
I was able to install another game and it works. I'm thinking this is a corrupt download. At 14GB, L4D2 is going to take awhile to download. Sigh.
UPDATE 2:
Ok, I'm really getting angry now. I thought the problem was isolated to the download of files as GTA III was working fine. I downloaded L4D1 as it was only half the size of L4D2 hoping to confirm this suspicion and it too will not launch. So far it's L4D1 and 2 that exhibit the same things. Also, when I try to go into Big Picture mode, Steam crashes. Are you sure this isn't a video issue?
I'm not sure what to do at this point. Might just flush the OSX install and try again.