Nope, as I added to my previous message, I actually opted to install to a completely different drive and folder (E:\Games\The Witcher), but the game still wanted to take something about a gigabyte on drive C and copy its module files to "Users\Public\Documents". I'm not sure what the reason for that is, but that's what prevented me from installing - I didn't have enough space on the drive where "Users\Public\Documents" was actually located. I freed 2 GB on that drive and it installed successfully - so basically, one has to be aware of the fact that the game installs something to C: (or whatever the syetem drive is) anyway, no matter where you choose to install the game, and that something is at least 700 MB or so as far as I can tell.
Glad you got that working. It's probably something like a settings file, that saves your graphics, sound, and keybinding settings. Modern games will often put these in the "Documents" type folders in Windows 7... I think it's so that someone else could have a different account on your computer and they could play the game with their own settings or something.
One warning... the game may place save games on the system drive as well, for a similar reason. Also, the way the game handles quicksaves is unusual in that it does not overwrite the previous quicksave but just keeps adding new save files, so you'll quickly get a lot of saves. So you may need to free more space on your system drive (or manually delete saves every so often).