"so how would that work if i installed it from a CD?"
Probably not the case with a new CD, but a scratch or even dust or a fingerprint could interfere with the drive reading the data off the CD, resulting in incorrect or incomplete file(s) copied to the hard drive.
Some optical drives can have problems or compatibility issues with some CDs. A few people have run into problems installing Divinity, where the install program had trouble extracting certain files, but they could usually be manually extracted (the wizm.rar file, and to a lesser extent automaps.rar, are the two main culprits).
It is possible something running in the background (particularly anti-virus) could have interfered with the install, causing an error.
Email Larian's support if that doesn't help. There may be a manual install procedure (like the one for
Divinity), or you may be able to re-extract just the executable.