Well, you still have to start with the original installer before you can patch it with the modern fixes. If that's not working, I don't know what to recommend. Your best bet would be to go over to ttlg.com and read the boards there. They are the experts on Thief.
I've tried what most have suggested, such as running the F:\setup -lgntforce (F is my CD-ROM drive), making it run on one core (cause mines dual core) and I get the same result. Funny thing though is when I eject the CD, I get an error message saying "there's no disk in the drive".
If you can, I would try installing it on another computer and then just copying the resulting directory to the computer you want to play it on. I would bet that would work; I don't think the installer really does anything other than copying/extracting files that has to be done to run that game. You may have to install all the patches on the other computer as well since the patch installers might have trouble if the game wasn't actually installed.
You could also try copying the files from the CD to your computer and install using those. That would surprise me if that helped but you never know.
Also, you didn't mention the OS you're using. If you're using Vista, I've heard that installing to C:\Program Files can be trouble so you might try another directory.