I used the following procedure to install Chaos Gate on WinXP.
I copied the entire CD contents into a folder on my desktop. I then double clicked on the setup icon in the new folder. The CD still has to be in the drive to play but this did get it to install. I had to change the shotcut to the game executable to Win 95/98 compatibility mode to get it to launch.
I still have the CTD issues described earlier in the thread.