I had the same problem. It seemed as though it was trying to install the IE 5.5 service pack and internet tools bundle. For some reason it wouldn't work with Windows 2000 - But worked fine with ME. I went to WindowsUpdate and installed the same update. This did not remove the problem installation with step 1 (updates). But it did open step 2 (Fox Install) as an option and I was able to continue from there.

TomW