This error is typically due to a conflict in the system files when the DirectX installation cannot find a corresponding system file to continue the installation. You can, however, manually replace a file that should allow you to install DirectX.
1. Insert the game disk into the drive.
2. Open My Computer.
3. Right-click on the game disk icon and choose Explore.
4. Open the DirectX folder.
5. Right-click on the dsetup.dll file and choose Copy.
6. Close the window.
7. Re-open the My Computer window.
8. Open the Local Disk C: drive.
9. Open the WINDOWS folder.
10. Open the SYSTEM32 folder.
11. Right-click on any empty space in the folder and choose Paste.
12. Close all open windows.
13. Now run the installation again.
If the issue persists, you should reinstall DirectX directly from Microsoft's webpage.