Update...

This is a know bug. Was fixed in Flash Player 9, then must have gotten
unfixed in the player 10 code branch.

It's been reopened and I'll look into a possible technote depending on what
happens with it.

In the meantime, here's a workaround:
Get a usb flash drive and set its letter to C:. This will get you past the
disk drive space detection problem and let you then install it onto the hard
drive you wish.

Regards,

Bentley Wolfe
Senior Support Engineer, Flash/Flash Player/Digital Editions
Adobe