Dead Space 2: Could not initialize display hardware.

I know this is an old thread, but try this:

The folder location you were looking in is Users/(MY_USER)/AppData/Local/Electronic Arts/Dead Space 2.

Try this instead:  Users/(MY_USER)/AppData/Local/EA Games/Dead Space 2

Check the settings inside the settings file in that folder and adjust as needed.   Make sure the height and width are within your system's accepted range, set to windowed, etc.

For some reason, the file directory changed from Dead Space 1 to 2.  I had the same problem today and was looking inside the Electronic Arts folder but Dead Space 2 settings was actually in EA Games.  I was able to change my display settings and restart the game successfully.  Hope this helps.