I believe its an issue related with sp2. Have you previously had it installed on your pc with the same windows updates.
SP2 has alot of issuses, some people don't have any problems and some do.. like myself. I switched back to SP1 and no problems. It could even be a crappy file with a bad installer. Or could be even not compatible with XP. Try seeing if there is another download link... refr3sh its just prolly XP with a skin pack and theme from DesktopX or something. Mine doesnt look like XP either.
XP. Its just a skin that makes it look awesome. Go to http://www.stardock.com/products/windowblinds/ and download windowsblinds. You can get kickass skins and wallpapers.
A little bit of a wild guess here but since that is an older game, maybe it needs to be patched so it is compatible with the newer operating systems.
^the installer should work fine if that was the case and all you would have to run would be windows compadability wizard.