I got a new machine and when I tried to download a audiobook from Overdrive I got an error similar to the one mentioned above. I ended up doing a number of things which may or may not have worked. Below is that I did:
I followed the directions found here - http://www.microsoft.com/windows/windowsmedia/player/webhelp/default.aspx?&mpver=11.0.5721.5230&id=C00D11E2&contextid=71&originalid=C00D2781
Basically they ask you to reinstall Windows Media Player. But when uninstalling it you need to remove about 3 other programs, and restart the computer. Then you need to delete whatever is in your drm folder and then again restart the computer. However that didn't work and I still got the error.
What I then did was in Overdrive, I went to Tools->Windows Media Player Security Update. But I got an error when trying to do this. So what I ended up doing was renamed the folder "C:\Documents and Settings\All Users\DRM" to "C:\Documents and Settings\All Users\DRM.old" then I tried the Tools->Windows Media Player Security Update again, and it worked. One thing with the renaming of the folder is that you need to "Show all files" which is an options in Windows Explorer.
I think the second step is really what I needed to do and reinstalling Windows Media Player was just a waste of time.