SUCCESS
Found a full proof way (been mentioned) and cmp said not to directly install over steam files but so far it's the only method that works 100% for me.
1. Download old patch from cmps link:
http://download.taleworlds.com/mb_warband_setup_1134.exe
or
http://download2.taleworlds.com/mb_warband_setup_1134.exe
2. Disable warband from automatically updating on steam.
3. Install the patch to your program files (default option).
3. Once it's done, rename to mountblade warband (the steam name) and copy into your steamapps/common directory.
4. Overwrite and merge ect.
5. Start crpg and there you go. You can play. No loss to mods, options, banners ect ect.
Some slight alterations here, the link that goes
here is not a patch, it is a redownload of the entire game that is patched to the
pre-latest version.
When you install this "patch" (For ease of terms), you can install it in any folder, in any directory, anywhere, and don't have to touch Steam at all. This also does not affect your registry settings in terms of start up locations as M&B doesn't use those registries. The only registries M&B really sets is serial, and if Steam already set that, then the minute you click the client executable, the game begins.
You do not have to overwrite your Steam installation, and turn off auto-update patching, etc. This is a full fucking install with the old patch, serial should be auto-detected unless you have one of those bad serials that doesn't fit.
If you don't want to fuck with your Steam installation of Warband, then install it somewhere else, simple.Just saw
this making all of these solutions irrelevant, but still, for future reference I guess.