I GOT IT TO INSTALL WITH STEAM!
I will post exactly what I did.
Copy the medieval ii total war folder from steam to c

rogram files/sega and past it there
Open notepad and copy this
Windows Registry Editor Version 5.00
[HKEY_LOCAL_MACHINE\SOFTWARE\SEGA]
[HKEY_LOCAL_MACHINE\SOFTWARE\SEGA\Medieval II Total War]
"CDKey"="D73D-01FE-BDBD-CBC6"
"language"="english"
"DistributionSource"="steam"
"version"="1.03.000"
"AppPath"="c:\\program files\\steam\\steamapps\\common\\medieval ii total war"
[HKEY_LOCAL_MACHINE\SOFTWARE\SEGA\Medieval II Total War\1.00.0000]
[HKEY_LOCAL_MACHINE\SOFTWARE\SEGA\Medieval II Total War\1.02.000]
[HKEY_LOCAL_MACHINE\SOFTWARE\SEGA\Medieval II Total War\1.02.001]
[HKEY_LOCAL_MACHINE\SOFTWARE\SEGA\Medieval II Total War\1.03.000]
[HKEY_LOCAL_MACHINE\SOFTWARE\SEGA\Medieval II Total War : Kingdoms : 1.03.000]
then save the file as kingdoms.reg on your desktop or wherever. Right click the file and click merge.
It will then add the entry to your registry.
Heh, its that easy.
This at least allowed me to begin the installation, i will go from there.
I was planning on trying it outside steam, if it doesnt work i can copy it back over.
this thread taught me how to be an l33t regedit h@cker
http://forums.steampowered.com/forums/showthread.php?p=9341199
UPDATE
I am installing the mods, the im going to copy the sega/medieval ii back into my steam installation and hope everything works out