Can't install Win 7 .........Set up cannot copy installation files

I mounted the ISO image on drive X: using deamon tool.After clicking Install Windows 7 the screen shows copying files....and then the error message pops up.

"Windows Setup cannot find a location to store temporary files.To install Windows,make sure that a partition on your boot disk has 685 MB of free space."

I have XP in drive C: and there is 21 GB of free space.I am trying to install Win 7 on drive F: which has 58GB of free space.

I know its not the right way to install Win7 but many have successfully installed in this way. many softwares are not working and some hardware failures r still there..i want a good option from u guys.....where to install win 7.I am currently having Win Xp in my SATA (320GB) and my IDE(40GB) is being used as a backup drive.Well I have a printer which is compatible with XP only and I need it for my work so can't sacrifice that.So what wud be a good option....
1)Win Xp and Win 7 on same HDD on different partition or
2)Different OS on different HDD

Thanks Drew.....I will try to install it with bootable DVD.

i know it can be a pain, but burn the dvd at the lowest speed your drive will allow, that will ensure that all files are successfully burnt to disc

Win7 install issue

I had some issues installing Win7 from DVD as well. For some reason it kept failing from the DVD. I found that if I mounted the ISO on a USB key, it installed perfectly. This site has a different method to install it, but should work for you. Hope it helps.
How To: Install Windows 7 Beta from a USB Key! | Maximum PC

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