Now that IS interesting!
I wonder if anti-virus software might do this to an installation procedure by checking files (or the whole system?) after detecting changes. Let's say the software you're installing makes a change in a location that the AV software monitors for suspicious activity. If such activity is seen then an aggressive system scan by the AV software is triggered. Have you tried disabling anti-virus software for the duration of the install? Just changing configuration of the AV software might be enough to get around the problem, if the AV software is actually causing this behavior.
I suppose an aggressive indexing service might do something like this, too, but I've never seen it happen before. (What I'm thinking is that, after files are copied onto the hard drive from the installation media, something starts indexing them. But I just can't imagine even insanely aggressive indexing taking so long to do it. And Windows XP's indexing service usually operates only when the system is otherwise idle.)
- prosaic