Setup*32.exe pops up for about a day, then _ISDEL.exe and another InstallShield process pops up, and then that seems to hang forever. I uninstalled and reinstalled after messing the game up by over-modding it, and now I'm stuck in the same problem, so I'm trying to learn a bit more. I'm currently struggling with this myself- I installed it once and it took literally a week for the installer to pop up. And I am FAR too lazy to go through all that work. So, one could single out the issue by checking the processes and services that run normally but are not running a minimal boot in safe mode. This didn't fix the issue normally, but then I booted in safe mode, ran the installer, and it worked INSTANTLY.
Edit: Aha! Well, I got it to work immediately: safe mode! The first thing I did was make sure that every executable in the CD-Rom drive was both set to Windows 98 Compatibility mode and set to run as administrator (verified by checking in registry).