If you ignore this error, does the rest of the install procedure go ok? If so you may not run into any problems in act 2, depending on your resolution or graphics quality settings.
Are you shutting down all non-essential programs (especially anti-virus) before trying to install the game? If there isn't something seriously wrong with Windows I wouldn't think a background program should interfere with a straight file copy, but it is not impossible (especially with large files/executables).
Check the CDs for any fingerprints, dust or scratches that may be preventing the drive from reading the data.
Do you have a different optical drive you can try installing or copying the files from? Even if there is a problem with the CD itself, a different drive may be better able to handle the error correction.
What language version of the game do you have (the installer error could be using Windows' language), and do the CDs or packaging indicate if it has been updated?
Did you buy the game new and recently? If there is something physically wrong with the CD you should be able to get a replacement, though that could be a bit of a hassle if you bought it online.