This article discusses problems that you may encounter when trying to install MSDE
If you try to install Microsoft SQL Server 2000 Desktop Engine (also known as MSDE 2000) on a Windows NT, 2000, XP or Server 2003 computer that does not have the Server service running, MSDE 2000 may not successfully install. To resolve this issue you will need to ensure that the Server service is installed, running and enabled on the computer where you want to install MSDE 2000. You can find further information about this issue in Microsoft KB Article 313939.