Try changing your region (Steam --> Settings --> Downloads + Cloud --> Download Region).
That worked for me once when I was downloading a game, and once when I was updating a game.
Sorry, I didn't read well your post. I thought you could log in into Steam, but not connect online.
Maybe the Steam client is not properly installed. One way to fix it, if that is the case, is to go to where Steam is installed, and delete everything except for the folder "steamapps" and the file "Steam.exe" and then to load "Steam.exe". The download/update process should start. Is the same process as to transfer the Steam folder to other place/drive, except you're not moving it elsewhere.
Post edited December 09, 2012 by Azrael360