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). This didn't fix the issue normally, but then I booted in safe mode, ran the installer, and it worked INSTANTLY.
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. And I am FAR too lazy to go through all that work. But this did seem to fix my issue. The game works fine.
I'm currently struggling with this myself--- I installed it once and it took literally a week for the installer to pop up. 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.
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 have no idea what was the trigger that got it to install the last time, I have UAC off and went through literally every executable and made it run through compatibility mode.
It could be an issue with having the physical disk: I have the Armada II disk scratched up beyond recognition, so I "borrowed" (ahem) an iso, and have tried both Alcohol and Daemon Tools to mount it and run... having the physical disk may be the difference, but as I said before, I got it to work ONCE after waiting literally a week without shutting down my computer or disrupting the processes.
I really hope I don't have to wait that out again. Gonna fiddle around with this and see if I can find the root of the problem.