Hello Shaun Peet,
Thank you for taking the time to write us.
The installer decompresses the files from the installation package in the temporary files directory, as specified by the environment variable. This directory is set by default to:
C:\DOCUMENTS AND SETTINGS\%CURRENT_USER%\LOCAL SETTINGS\TEMP
This is why the installer needs space on your C drive, regardless of the target folder you've selected for the product to be installed in. You can change the environment variable to point to a partition where you have more available space.
If you have any additional questions, please contact me.
All the best,
the Telerik team