Ok...listen very carefully.
1. Uninstall your current installation of D3 using Add/Remove Programs in the Control Panel.
2. Re-install Descent3. If you have D3 Merc, install that once you've finished installing D3. If not, ignore that and just make sure D3 is installed.
3. You probably have the Australian version of D3, this is what usually gives the "Old file cannot be found error". Either that or something happend during the install. (Some Australian copies were accidentally sold in the US by mistake). Once D3 is installed you need to download the Australian 1.4 patch for D3, here is a link...
http://www.dfiles.de/download/d3/patche ... 4patch.zip (extract the zip file to your desktop and run the patch).
4. Run D3, the D3 Launcher window should come up. It's the window that has Play/ViewReadme/Setup/InstallDrivers/Auto-Update and some other stuff on it. (NOTE: Auto-update DOES NOT WORK, do not try to use it, download the patch via the link I provided above).
Click SETUP on the window and make sure the correct settings are in place on the Video/Audio/Controls/Speed/Network/Misc tabs. Then click OK, this will avoid the CACHE directory error you mentioned earlier.
You should be all set, click PLAY and see if the game will run. Make sure you follow the directions carefully though.