Try to enter the path you want to install to manually i.e: (probably)
C:\Program Files\Microsoft Games\Microsoft Flight Simulator X\ in the setup wizard
DO NOT use the %Program Files% tag.
It sounds like this will not work, however.
Click Start, and type regedit. Press enter and enter administrator password if necessary.
Navigate to: Computer\HKEY_LOCAL_MACHINE\SOFTWARE\Microsoft\Windows\Current Version
Make sure the Current Version folder looks as it should. Here is an image of a working Current Version folder:
If your ProgramFilesDir, ProgramFilesPath or CommonFilesDir is different, correct it or if unsure, post back. In particular the ProgramFilesPath SHOULD BE REG_EXPAND_SZ. If your ProgramFilesPath is REG_SZ, change this to REG_EXPAND_SZ. This corruption is quite common. If necessary, make these registry entries.
Try your FSX installation again. If it still does not work, try copying your entire DVD to your desktop (or wherever) and have a look through the directories for strange symbols, signs of a corrupt disk. This will take a while to copy.
If you can and these steps do not work, please can you post the FSX install log file and messages in event viewer. Post back if these steps do not work or you don't know how to do any of the above.