Apparently it gets more interesting.
Going for the debug dosbox, I was too lazy to run the install from a windows console and opted to create an empty BLOOD.BAT file instead (figuring that if the installer could save to the batch file created by windows, it will also save to an empty one).
And lo and behold! All files copied themselves fine on the first run of the game...
Apparently, when the file was created with windows and then altered in dosbox the path to the game folder wasn't in capital letters, which got the game to die...
Attached is a zip containing both good and bad batch files, as well as the logs of running the game through each one of them as well as the results of running the install (which is what caused all these problems in the first place 😉 )
LoneLines list of workarounds for various games in DOSBox:
http://ADogsBox.jellofishi.com