Setup.exe installs the Windows version, install.exe installs the DOS version. In XP, KQ6 is probably better run in DOS, with VDM Sound (not DOSBOX).
Select ‘General MIDI’ for music, and ‘Sound Blaster’ for sound, assuming you have some sound card or onboard chip sound.
Simply right-click Sierra.exe and select run with VDMS, and you should get flawless performance (well, the music will run too slowly, you need a VDM Sound addon for that, and there’s possibly a timer bug in there somewhere, but c’est la vie. Besides, I can fix those if you want).