I had absolutely no issues what-so-ever. I also did not need to copy any "...\drivers\etc" content to anywhere else in my c drive.
I believe the trick is on the java you install before running sapinst.exe
I am using j2sdk-1_4_2_19-windows-i586-p.exe on Windows Server 2008 R2 64-bit (NOT, I repeat, NOT JRE)