Chris, the sequence you describe below  is exactly what is happening on my Dell Inspiron 530 running Windows XP SP3.  The Dell Display Monitor installed and works fine with no errors.  Do you know a  way I can get XP to just ignore the new display.

First, a Found New Hardware, DellS2340M Digital bubble appears above the tray. Then The Found New Hardware Wizard opens stating:

"There was a problem installing this hardware-plug and play monitor. A service installation section in this inf is invalid. Click finish to close the wizard."

Then the tray bubble reappears with the message:

"A problem occurred during initiation. Your hardware may not work properly."