I dunno if it would let you install the game without up to date Directx, but you can try testing that. Find out if you have directx 9.0c(I think) by clicking on Start / Run / type "dxdiag". It should tell you which version you have.
I've always disregarded hl2 messages about my drivers being out of date. That's mostly due to the fact that when I recieved those messages everyone was pushing out new drivers for vista that were totally messing up everything.
Directx can be downloaded
here. Hope this helps. Good luck.
PS: BTW, what error is it exactly?