Whenever I try to install Escape From Monkey Island I get the following Setup Initialization error:

Setup requires _SETUP.DLL and _ISRES.DLL (located in _SETUP.LIB) in order to operate properly. Please ensure that these files are located with SETUP.EXE

The file IS there, and I was able to install the game fine on Windows ME, so any help would be appreciated.

Try running setup.exe in Compatibility Mode to install the game.

No good, same error as last time.

Something else that may be of notice.. When I run "SET" in the command prompt, the folder it directs me to is one with "Read-Only" Attributes, and when I try to change the attributes they just get reverted, and if I try to do SET TEMP=somethingelse, it just gets reverted as well.

Control Panel->System->Advanced.
Click Environment Variables button.
Change the PATH variable in System variables box.
There should be no need to reboot.

Wow it worked.. thank you so much :-)

forgive my noobish request, but could someone please expand on this for me? what should i change the PATH variable to?

i have the exact installation problem with Monkey Island 4 -- quite frustrating to say the least

Hmm... I did mean TEMP in that my post..

Create new folder named 'temp' to any of your drives root, for instance: c:\temp

Then change the TEMP (not PATH) variable to it, so it reads:
c:\temp

You can also change the TMP variable.

that seems to have done the trick. thanks Wilhelmus!