From Intense Ragnarok Online Wiki
Error: "Cannot init d3d or grf has problem"
RO is not detecting your graphics card/drivers. To fix this, open Setup.exe in your RO folder. You should see something in the first two drop down menus.
In this picture, these are Direct3D HAL and 800 x 600 x 16. If not, please set them to your appropriate Video Card and Screen Resolution. If you're not sure what your video (graphics) card is, just try random ones. Make sure settings are saved, which might not occur if Ragnarok Online is not installed properly. If you can't see any other choices other than Direct3D, you might need to update your Video Drivers or DirectX. You also might need to reboot your pc after applying changes.
This is a symptom of graphics driver problems. You must have both graphics drivers for your graphics card, and Microsoft DirectX installed to play RO (as well as most other games)
1) Open setup.exe/iRO Setup.exe in the RO folder, and make sure something is selected in the first two menus. If one or both of them has no options available (which will probably be the case) that means that you have a graphics driver problem.
2) Start -> run -> dxdiag - see if it works and brings up a diagnostic program. If it does, go to 4).
3) If that doesn't work, you don't have directx installed - download it from microsoft website (and if you've got a pirated copy of windows and it won't let you do that, search for the "redistributable", which is not protected like that). Install directx, and try setup.exe again.
4) If it still does not give you any options, you do not have working graphics drivers installed for your graphics card. You can download them from the manufacturer of your graphics card (or, in the case of some systems, from the manufacturer of the computer). Install them.
5) Run setup.exe/iRO Setup.exe and select an option from both of the top menus, and RO will now work.
--Credits to iRO.