I have the same problem with an Acer n35. I have upgraded the ROM to Windows Mobile 2003SE, using the file provided by Acer. The systems works correctly. I run Windows 98 on the PC, with ActiveSync 3.7.1 because it is the most recent that runs with the OS.
I too get the error message, despite downloading again from the site for good measure. This spplies whether I use the installer, or merely copy the file to the PDA using ActiveSync, and then tap on the CAB file in the PDA to trigger installation.