Okay, so I contacted Valve about the "Error Reading File" issue with "Plants Vs Zombies"

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Here's their solution to the problem:

Please exit Steam and go to the folder called C: Program FilesSteam (this is the default location for a Steam installation - if you set a different installation directory, you will need to browse to it). Delete all of the files in this folder except: The Steamapps folder and Steam.exe (this file is listed as an application and features the black and white Steam logo) Restart your computer. Then, launch Steam.exe from within the Steam installation folder, and not from a pre-existing shortcut. With Steam running, re-test the original issue. Note: This process will not affect your currently installed games. Additionally, please complete this process for your installed game(s): Title: Verifying Game Cache Files (GCF) Link: http://support.steampowered.com/kb_article.php?ref=2037-QEUH-3335 Let us know if you have any further questions or concerns.

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So, did it work? Absolutely...NOT!.

So I guess another ticket to them is needed. If anyone has a solution theirselves to this problem if you have had the same issue. Please let me know. This is driving me mad!