Someone else had a similar problem but were using a G3 or something. What model computer do you have? Which OSX version are you running now? I presume you have a dual startup disk right? OS 9 & OSX. Make sure Classic environment is CLOSED before you try to install LW. Command-Option-ESC will bring up a window that shows which programs are running & whether you're running Classic. If you are, force-quit it.

BTW cannot install on this volume - generally means you're lacking permissions to install on that volume.