I have the steam version of ARMA2 and ARMA2:CO (I also have PMC and BAF DLCs). I cannot run A2CO within Steam. I have tried many of the suggestions in this thread. I've run steam as admin. I've set both .exe files for arma2 and arma2: AO to run as admins. I tried the CO zip file in the original post and nothing works. I have verified the game cache for all of my ARMA2 games at least a dozen times. I also have tried uninstalling and reinstalling the games. I still cannot run CO and I have problems joining some servers because of this issue.
I also had an issue running AO. I received the pixel shader error when running AO. I found a solution to this issue by putting "-mod=C:\Program Files (x86)\Steam\SteamApps\Common\ArmA 2;EXPANSION;ca" in the launch options within Steam.
I don't think I am experienced enough to mess with registry files and honestly I am a bit disappointed that I would need to do something like that to get a game to work through steam...I am attempting to play just ARMA2. (I am interested in DayZ but I have not yet tried to install it or anything like that).