for 8 horrible weeks i owned a compaq computer. during one of my many conversations with the various tech support people, one mentioned in passing that when win95 came out, the standard version wouldn't install on compaq machines. that you had to run compaq's special tweaked version. I thought it was bull, but when IE4 came out, the microsoft download site stated that compaq owners had to wait for the compaq version to be released!
on another note, try copying the win95 folder from the cd to the harddrive, then click on setup and see if it will install from the hard drive