The installation routine is included as two booklets, one for Pro/ENGINEER and one for Pro/MECHANICA, with the program. My own installation routine is presented here along with the additional setup required to make sure the motion aspect of Pro/MECHANICA works.
The system Pro/ENGINEER is installed to is an AOpen AX3S mainboard with a PIII 1GHz processor, 512MB of RAM and a 256MB GeForce 5600XT; one Sony DVD-RW and two hard drives, one 120GB Western Digital and an 80GB Maxtor. The OS is Windows XP Pro. It will install on an AMD K6-266 with 64MB of RAM and 32MB TNT2 M64 (PCI model), with Windows 98SE. This actually meets the minimum requirements specified in the installation booklet supplied but is not recommended unless you are masochistic and don't mind a program that runs incredibly slowly and as such will be prone to hanging the system.
On inserting the CD, the following screen appears (eventually):

The details at the bottom left-hand corner simply provide information regarding your network card, if you have one. Click next.
The "define installation components" screen shows. Here I have the installation directory set as E:\proe2001 and am installing both Win95 and WinNT versions as I am using XP.

I chose E:\proe2001 because:

Actually the installation location doesn't really matter too much. The above warning shows when (presumably) Pro/ENGINEER is to be installed to a location that is not fully DOS-compatible, i.e. where the location has more than 8 characters or contains spaces.
Clicking next brings the Optional Configuration Steps screen:

This allows you to change certain aspects of the PTC OLE Server, browser .exe location and shortcut locations (fairly self-explanatory really).
Clicking next brings you to the OLE Server Configuration screen:

I redefined the options to point to an empty folder, in this case %proe2001%/files/ (where %proe2001% is the directory where Pro/ENGINEER is to be installed), for the following reason: when working with Pro/ENGINEER it creates addtional files with an extensor relating to how many times it has been saved, i.e. part.prt.1, part.prt.2, etc. After a while this can clutter up the default directories. As my D:\ partition is specifically for the operating system and drivers/essential files, I would rather these locations pointed to elsewhere, and to somewhere convenient where I can wipe any unnecessary backups. Pro/ENGINEER does have an option to wipe these files within it, so this method and reasoning may be a possible reflection of control-freakery. Redefine the locations to suit.
Clicking next brings you to the Windows shortcut location preferences and HTML browser locations, amend these to suit. For the startup directory this is changed to reflect the amendment in the OLE Server Configuration screen.

That should be it. The next screen brings up a confirmation requester to install Pro/ENGINEER.
The routine for installing Pro/MECHANICA is pretty much identical to that of Pro/ENGINEER, with one or two exceptions: the installation directory I chose was %proe2001%/promech2001, where %proe2001% is the Pro/ENGINEER location. You also have the option during the Pro/MECHANICA installation routine to specify where any additional help files are located. Usually this is %proe2001%/html.

The rest of the Pro/MECHANICA installation should be relatively straightforward.
When Pro/MECHANICA has finished installing, an environment variable must be added to point to Microsoft's C++ Compiler. This is used for modelling motion, and if Pro/MECHANICA's motion is not going to be used this step is not necessary.
It should look very similar to image below:

The system should now be rebooted. After rebooting, load up an assembly or part in Pro/ENGINEER and switch to Pro/MECHANICA. When this has loaded the Motion option should not now be greyed out, and Motion analysis should load.