Ok, for all the other peon's out there who are struggling to install it, this is how I did:
1) Grab that trusty ol' win2k install disk and browse to (cdrom):Supporttools
2) Run the install.exe you'll find there. What this does is install the win2k support files, including the win compatibilty tool the xp has as standard.
3) Click on StartProgramsWindows 2000 Support ToolsToolsApplication compatibility tool. This'll open a new window with some option
4) Select win95 emulation and use the browse option to launch the BC3K209FREE.exe file. This'll start the installation proccess. It will moan about there being a problem with a .dll file, but just ignore it.
Now for the fun part.
5) Browse to the installed game directory. In there you wil see BC3K209WIN.ZIP. Exctract it to the same directory you are in or it will not work (read the readme in that .zip file if confused)!
6) Create a shortcut to bc3kwin.exe and put it where ever you want (desktop, games folder..) do not use the bc3kwin-full.exe as it saddly won't work in fullscreen mode.
7) Right click the shortcut and add the following switches: "/n /d1" after bc3kwin.exe in the target box. /n disables the intro and /d1 puts it in debug mode and doesn't bug you to put the cd in! Now just click on ok!
You are all set to play now! Just double click on the shortcut you have made and it should start off with no problems at all.
No need to worry about setting up the sound either as I have found using the bc3kwin.exe shortcut sets up the sound for you.
Isn't it all lovely
Thanks to Cc for helping out by being a sounding board and giving me advice that lead me to getting it going.