During the introduction of XP Service Pack 2, one of MS hotfixes broke CD recognition of the game CD on some PC's. Usually Universal Plug and Play caused this to happen, so disabling that service in Services.msc usually clears this up.
If not, then it is a combination of software, hardware, anti-virus and MS hotfixes (same problem still present in XP SP 3) and installing manually by exploring the game CD and changing the properties of Setup.exe to Disable Visual Themes and/or setting to Win 98 compatibility mode and launching this file directly afterwards will allow the game to install.
Other times, just unplugging USB peripherals will do the trick.
but you also still need to follow the patching instructions from the XP link above.