OK
soooo:
So first off check if in the cryptic launcher all services are up and running(all ready or similar status) if one of them are not working - wich is very propable starting off from your problem's base - now THAT one i need the log file. from the location you mentioned...
Also: you trying to play on the same machine where is the server at? If not, then the hosts file should reflect the server's IP instead of 127.0.0.1...
Also i need to mention it needs a very strong machine with LOTS of ram for local play(~12 - 16 GB and a FAST CPU/GPU) so you will need to wait when you are first loading up gameserver, when you are connecting for a first time, it can take up a much time(it occours after every pc restart)... gameserver only begins the load up sequence only if you are connecting to the gamemap...
you also need to start the gameclient with the neverwinter.exe and put the server ip there too.
Also what os on you are?