Are you 64-bit?
List of limitations in 64-Bit Windows
http://support.microsoft.com/default.aspx/kb/282423#appliesto
Some 16-bit DOS-based Programs and the Command Prompt will not run in full-screen mode in Windows Vista and in Windows 7
http://support.microsoft.com/kb/926657
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.
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
Help with Windows 7 compatibility problems
http://windows.microsoft.com/en-us/windows7/help/compatibility
Windows 7 Compatibility Center
http://www.microsoft.com/windows/compatibility/windows-7/en-us/default.aspx
A Virtual Machine solution might work for you.
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).
VirtualBox is an impressive VM contender
http://windowssecrets.com/search/?cx=017937947691920082874%3A_ilcm6kdy_y&cof=FORID%3A11&q=VirtualBox+is+an+impressive+VM+contender+&sa=Search&advWS=1&advSAN=1&advPages=15