An idea, at least - If you don't have an ISP download limit, you could try moving the contents of your piggs file to a different folder (leave the 'piggs' folder itself. If this doesn't work, I have safely moved the files back before). Then on the launcher, click 'options' and check the 'disable on demand patching' box.
I couldn't play at all with the 'convenience' of patching as you go - disabling the on-demand patching requires the game to download the entire patch before letting you in the game. I think there's a pretty big bottleneck at the patchserver right now; took me over 3 hours to get everything downloaded, but I also have a fairly slow connection.
FWIW, if you have a corrupted file somewhere, this should replace it and let you get past the circular problem. The amount of time it takes, well, that may be a different story. But if you get that dll error right away, there is probably something else wrong and you're better off trying other ideas.
Another thought is if you have a Tribble account (if you're a gold member) is to update Tribble first, and regularly, even if you don't play on it. Then you're not downloading all the files - the gameclient will check the Tribble files and copy them over to the Live game where needed. Don't just copy Tribble files yourself though, you can screw up your files by doing so.