1 - Open UTEngine.ini
Located at My Documents\My Games\Unreal Tournament 3 Demo\UTGame\Config\UTEngine.ini
If you are an administrator, it might be in: Program Files\Unreal Tournament 3 Demo\UTGame\Config\UTEngine.ini
2 - Change the line
bInitializeShadersOnDemand=False
to
bInitializeShadersOnDemand=True
Located at My Documents\My Games\Unreal Tournament 3 Demo\UTGame\Config\UTEngine.ini
If you are an administrator, it might be in: Program Files\Unreal Tournament 3 Demo\UTGame\Config\UTEngine.ini
2 - Change the line
bInitializeShadersOnDemand=False
to
bInitializeShadersOnDemand=True
3 - Restart before trying to run the demo again.
Interactive 3D (i3d) has placed 10 servers online, maybe you should try them.
They have I3D.nl in there names if i am correct.