Hi,
It sounds like you are in XP compatibility mode, which is fine.
Make older programs run in this version of Windows (Windows 7)http://windows.microsoft.com/en-us/windows7/Make-older-programs-run-in-this-version-of-Windows
Have you tried right-clicking on the shortcut to the program, or the .exe, and selecting the "Run As Administrator" option? Do so even if your user is an Admin. Try right-clicking on the actual Setup.exe and selecting the "Run As Administrator" option? Do so even if your user is an Admin.
Windows Virtual PC
Download Windows XP Mode
http://www.microsoft.com/windows/virtual-pc/download.aspx
Windows XP Mode (Windows 7 only, but not any of the Home versions) "You are not eligible to download Windows XP Mode. You must have Windows 7 Professional, Enterprise, or Ultimate to run Windows XP Mode". If you have an old XP CD (or other older Windows CD) available you can just download the Virtual Machine and skip the XP Mode download. This covers the whole gambit of virtual machines in "Home" versions if you want to have a look at it. Of course you will need a licensed copy of XP to install and run in any of them (except XP Mode).
Hope the information is helpful.