It could be lying. In my experience you'll often get a message like that when there is really something else wrong with the process - usually related to it not being able to write for SOME reason, but not the one stated. Laziness on the part of the coders.
Are you using an Admin account to install from? And much less likely - is the disk you are trying to write to Read Only? Those are the sorts of problems I've seen when getting that kind of message.
I don't believe there is anything in the registry which holds the disk size. That data is already readily available in the disk properties info, which must be somewhere on the disk (MBR?).
Lastly it's possible (though again unlikely) that it thinks the source files are larger than they really are. But you already re-downloaded it, so unless they are corrupt on the server that's an unlikely cause.
EDIT: And very lastly, are you carrying out a Clean install? I.e. do any of the data files currently exist? (Maybe they are Read Only).
Last edited by: smokie on Mon 5 Apr 10 at 18:50
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Where does XP store the HDD size? 
Where does XP store the HDD size? 