A security error is thrown when attempting to perform an install from a shared network location when using Server 2003:
“Windows cannot access the specified device, path, or file. You may not have the appropiate permissions to access the item”
This occurs for both network shares \\server\share\setup.exe as well as for mapped drives V:\setup.exe
Although this error appears security related, it is in-fact related to Enhanced Internet Security for IE.
1) Remove Enhanced Internet Security for IE using Add/Remove Windows Components. Even though the error appeared to be related to related to security, it was in fact an issue with Enhanced internet security.
2) Follow the procedure listed in this KB 815141.