Every time I launch Dishonored in Steam, it pops up a window saying 'first run, installing ms direct x...' Can anyone explain why this might be happening? The game otherwise plays very nicely.

Most every game updates DirectX as part of it's install. This occurs even if nothing gets installed, the installer just makes sure the files are up to date. The only way to stop it is to have a DirectX already installed that is newer than the game. Which in this case, is unlikely. Though I am not sure what version (date) they use.

In any event, let the DirectX thing do what it needs to for a couple of minutes. If you are concerned, set a System Restore point before you let it update.

The problem was no request to reboot after installing. I did just that and it stopped.

I've got same problem, each time i launch Dishonored , steam installs Direct X it's funny bug, but please fix that.