The reinstall did not help. I don't understand what is causing the hold up. It is so frustrating to have purchased the game disc and not be able to just pop the disc in and play the game off of it. The game is installed on my computer but yet something with steam is holding me up. Sorry, but I am just very frustrated. This game is so much better on the computer but sometimes I wonder if dealing with steam is worth the hassle.
Anyways, now that I vented a bit if anyone has any other advice I'd appreciate it.

Did you make sure that Skyrim was fully un-installed? The folder was deleted? as in going to default folder of steam
and making sure that there is no Skyrim.. I get the feeling that a) didn't finish downloading and/or installing. Perhaps download was
pasued and or can't connect, so when trys to update it fails? just an idea..
as said best to install with CD dish you got first.. You may want even think about full un-installing steam too. But before you do that.
Make sure any other steams games you have, you may want back them up.. If this apply to you..
My suggestion is..
a) uninstall Skyrim... default folder is -
C:\Program Files (x86)\Steam\steamapps\common\skyrim (for Windows Xp 64/ Vista 64 / Win 7 64 users)
C:\Program Files\Steam\steamapps\common\skyrim ( for windows 32bit/ Win xp/Vista/Win 7)

un-install Steam fully too..
c) Make sure your computer current location/Time/date on your computer is correct also (this has happen to me few times too)
So make sure it set to right country and what not.. I assume your in USA? so that shouldn't be issue.
d) reboot.. make sure steam is not loading up after reboot.. if it is, you do have very bad issue there..
e) re-download steam https://store.steampowered.com/login/ and install
after that.. log in, and some people say its best to install via DVD/CD's.. but you could try installing right from steam
too, but if you have slow internet connection. this could take a while to re-download.. and you will not be able to play intill its fully
downloaded..
or just install via Disc and go from there..
I hope your computer/windows and drivers are all update .. my bet is your clock/date/time maybe out syn... that could be the issue
Good luck.