From what I've heard, the fact that the program itself simply boots the game from the second time onwards is a "feature not a bug", so that you don't have to go through the splash screen every time you start the game. That said, with the SETUP switch it *should* work - that's exactly what the setup shortcut in the Start menu does, and it works perfectly for me from command prompt too... When you say it doesn't work, what do you mean? It just boots the game, or it comes up with an error of some kind? There shouldn't be any reason for that not to work, just literally GOGSetup.exe SETUP and then enter ought to do it.
Deeper into the rabbit hole we go... have managed to find the way of fixing it once and for all, but it requires trawling into your registry. (please be careful here)
Run regedit (from your run box), and then go to HKEY_LOCAL_MACHINE\SOFTWARE\Wow6432Node\GOG.com\GOGPOPULOUS3. There will be a string there titled "FIRSTRUN", which tells the setup program whether it needs to bring up the setup page when you run it. The value will currently be set to NO. Double-click that and change the value to YES. Then run GOGSetup directly from the installer folder, and it'll bring up the settings page.
(note I'm on 64-bit, if you're on 32 it might not have the Wow6432Node folder in the path, in which case it'll most likely be HKLM\Software\GOG.com\GOGPOPULOUS3)
Hope something out of all this works for you! =)
If you need to contact GOG at all, click the support link at the top of the page. If the setup shortcut in start menu isn't working then it could be useful for them to find out.
Post edited November 11, 2012 by Slanzinger