Thanks for the replies!
I tried all variations of install c: that I know of, to no avail.
However, I succesfully copied the floppies into the dosbox directory through Win7. From there I ran the 1942 install through dosbox. After some tinkering with installation directories, I finally got the game up and running!
Now I'm having issues installing the 3 bonus scenario disks. I have also copied these into the dosbox directory and in the installation window I get a "You can only install the game from the original disk(s)!" Running install directly from the floppy results in the same error.
For clarity here is my installation sequence:
-From Win7 I copied disks 1-6 of 1942 PAW into C:\Dosgames\1942 disks
-From Dosbox I went into c:\1942di~1 (same as '1942 disks' directory previously created in Win7) and ran install.exe
-During installation, I changed default install path of c:\mps\1942, to just c:\1942
-Installation completed succesfully and game boots from c:\1942 directory just fine!
As for the 3 add-on scenario disks, here is what I did:
-From Win7 I copied all 3 scenario disks into c:\dosgames\1942 disks\scenario disks
-Go into dosbox c:\1942di~1\scenar~1 and run install.exe
-In installation window I get error message "You can only install the game from the original disk(s)!" Same goes if I run directly from floppy.