Ok I have some bad news and good news regarding my problem.
BAD NEWS
1)With a clean install of RTW in C:\Program Files\Steam\steamapps\common\rome total war gold,
I install RSII on a separate folder outside Program Files.
2) I copy all the RSII files in the RTW folder mentioned above.
Contents then are :
3) I run the launcher as administrator and ... I have the same problems mentioned before.
For example if I choose BI engine then the game starts but I dont have an option for a campaign.
If I choose RTW engine then NOTHING happens 
Launcer.ini file is this : ( note I took out my steam id name)
Note that Steam=No is always like that and if I manually put it to 1 or Yes problem still is there.
My cmd pops up when game starts with BI engine ( remember though that I CANT choose a campaign, only custom + historical battles)
cmd looks like this : (again I deleted my steam id name)
GOOD NEWS
I managed to run the game by following the instructions mentioned in the main thread when you cannot start the launcher.
That is go to steam library->rtw->properties and set launch option accordingly( for example -mod:play_Greeks -show_err -nm)
When I do this everything is fine and I can play the campaign 
So what I ask is either you guys help me solve the first problem or tell me how I can change the settings by using solution number 2. I dont mind playing this way but I dont know how to edit the options the launcher gives you, because launcher wont work.
Again thank you for your time.
EDIT: For some strange reason I cant save my game. I started a Spartan campaign and save & load options are disables