The Collaborative International Dictionary of English v.0.48:

Preoccupy \Pre*oc"cu*py\, v. t. [imp. & p. p. Preoccupied
   (-p[imac]d); p. pr. & vb. n. Preoccupying.] [Cf. F.
   pr['e]occuper. See Preoccupate, Occupy.]
   1. To take possession of before another; as, to preoccupy a
      country not before held.
      [1913 Webster]

   2. To prepossess; to engage, occupy, or engross the attention
      of, beforehand; hence, to prejudice.
      [1913 Webster]

            I Think it more respectful to the reader to leave
            something to reflections than to preoccupy his
            judgment.                             --Arbuthnot.
      [1913 Webster]

WordNet (r) 3.0 (2006):

preoccupy
    v 1: engage or engross the interest or attention of beforehand
         or occupy urgently or obsessively; "His work preoccupies
         him"; "The matter preoccupies her completely--she cannot
         think of anything else"
    2: occupy or take possession of beforehand or before another or
       appropriate for use in advance; "the army preoccupied the
       hills"

Moby Thesaurus II by Grady Ward, 1.0:

70 Moby Thesaurus words for "preoccupy":
   absorb, absorb the attention, adopt, appropriate, arrest, arrogate,
   assume, beset, catch, charm, colonize, come uppermost, compel,
   conquer, drive, enchant, engage, engage the attention,
   engage the mind, engage the thoughts, engross, engross the mind,
   engross the thoughts, enslave, enthrall, exercise, fascinate,
   fill the mind, grab, grip, hog, hold, hold spellbound,
   hold the interest, hypnotize, immerse, impel, indent, infatuate,
   involve, involve the interest, jump a claim, make free with,
   make use of, mesmerize, monopolize, monopolize the thoughts,
   not let go, obsess, obsess the mind, occupy, occupy the attention,
   occupy the mind, overrun, possess, preempt, preengage, prepossess,
   requisition, seize the mind, sit on, spellbind, squat on,
   subjugate, take all of, take it all, take over, take possession of,
   take up, usurp