I did what Sayianpride did, but I still get Run-time error '5': Invalid procedure call or argument
Was getting the same error when i tried to connect from the GC to the server on the pc. Took a stab in the dark and moved the executable directory to a path that doesn't have any spaces in it. Actually made sure the path was short like old DOS files (eg, C:\GCOS-RLS) and that stopped the error from occuring.
I actually suffer from the same problem, the drive refuses to spin up and i just get an initialisation error and yes i have a retail game in the drive (mario kart in this case although i've tried mario sunshine as well)
If you're using GCSIM Repack then it could be a problem with your network card because it has trouble with some network cards. Try using GCSim Preview edition instead and choose the 10mb half duplex speed.