The only registry entry the game uses is for the patch to find the install path. I doubt that is the problem, but in theory the install could be choking on a corrupt registry entry and giving a misleading error. That shouldn't prevent a manual install, though.
In any case, the registry entry the game creates is below, if you want to check / delete it;
HKEY_LOCAL_MACHINE\Software\CDV Software Entertainment AG\Divine Divinity
Do you have access to another computer you could try installing the game on, to make sure there is not something wrong with the CDs?