In my experience (not a lot, but some), splash.bmp is usually just a background file for a setup screen or somesuch. kernel32, though . . . the kernel is the core of the operating system. If something's screwing that up, something's likely seriously wrong with it. In this case, though, as someone's already said, it may just be because you have WinME.
Sounds to me like maybe you have a bad install CD. It does happen; in fact, we used to have Yahoo and we had a bad install CD as well. I don't remember the exact error messages ( it was over two years ago, but the splash.bmp error sounds familiar), but we ended up having to send in for another install CD. Then it worked fine.