Hello, dibeach.
As you are an experienced technical person, I would be economic in words. Only want to point out that many setup programs are having their 16-bit stubs or squarely 16-bit programs, so the problem typically points to a defective VDM of his/her system. Here is a batch file doing a basic repair see if it corrects the problem. (You can detect what it does as it is self-explanatory enough. Freely make change to suit your client's system config. before running.)
:: ----------/repair00.bat/-------/tsuji/---
@echo off
:: MODIFY THE SYSTEM CONFIG INFO here-----
set cd_letter=J
set windir=c:\windows
:: MODIFY THE SYSTEM CONFIG INFO above----
c:
cd %windir%\system
if exist winoa386.mod ren winoa386.mod winoa386.old >nul
if exist vgafull.3gr ren vgafull.3gr vgafull.old >nul
cd %windir%\command
For %%F in (winoa386.new, vgafull.3gr) Do extract /a %cd_letter%:\win98\win98_22.cab /l %windir%\system %%F
cd %windir%\system
ren winoa386.new winoa386.mod
cd %windir%
set cd_letter=
:: ----------/repair00.bat/-------/tsuji/---
Edit the line on cdrom drive letter (J above) being running it. Also care about line-wrap.
If the above basic repair fails to correct the problem, meaning system still does not accept users to install applications, say, his/her cad program. Then, more dlls may have been damaged. In particular, you have to check those in the
[HKLM\System\CurrentControlSet\Control\SessionManager\KnownDLLs].
You have then more detective work to do.
regards - tsuji