hehe, setup programs aren't clever, are they
setup looks for the directory the original game is installed - that's stored in the registry. but a "." means "current directory" so setup will check the directory Setup.exe is being executed: on the CD, where 0 bytes are free.... you see the problem?
try this:
run REGEDIT.EXE and go to HKEY_LOCAL_MACHINE\SOFTWARE\MAXIS\THE SIMS
change every "." to the full pathname the game is installed
(like "C:\Program Files\Maxis\The Sims").
please be careful when you make changes in your registry.
then try to install Livin' Large again...
hope this helps.