Microsoft states in their article: KB224313

OFF2000: How to Install Office 2000 on Windows 2000 Terminal Server
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This article was previously published under Q224313
SUMMARY
When you install Office 2000 on a Windows 2000 Terminal Server computer, you must do several steps before installation can be completed. Otherwise, you receive the following error message when you attempt installation:

Some default settings in Microsoft Office 2000 setup do not work properly on a Windows Terminal Server. To install Office on Terminal Server you must use the instructions and tools available in your Office 2000 Resource Kit or at http://www.microsoft.com/Office/ORK
MORE INFORMATION
The following assumptions about your configuration are assumed before you install Office 2000:
You have Terminal Services installed and enabled. You must configure the Terminal Services mode to be in Application Server mode in order for multiple terminal server clients to run Microsoft Office.
Please consult your Microsoft Windows 2000 documentation and Microsoft Windows 2000 online Help for more information about installing and configuring Terminal Services.

You have obtained the terminal server transform file, TermSrvr.mst, and placed it in an accessible location for the installation. You can obtain the transform file from the Microsoft Office 2000 Resource Kit. This file can be found at one of the following locations:
The ORK\PFiles\ORKTools\Toolbox\Tools\TermSrvr\ folder of the Office 2000 Resource Kit CD.
If you installed the ORK, the drive\Program Files\ORKtools\Toolbox\Terminal Server Tools folder, where drive is the drive letter where Windows 2000 is installed.
You can download the Office Resource Kit (ORK) Core Tool Set from the following Microsoft Web site:
http://www.microsoft.com/office/ork/2000/appndx/toolbox.htm#orktools

Install Office Disc 1 on the Terminal Server Computer
In Control Panel, double-click Add/Remove Programs, click Add New Programs, and then click CD or Floppy.
Click Next.
Click Browse.
In the root folder of the Office Disc 1, select Setup.exe and click Open.

Setup.exe is added to the command line for installation program box.
On the command line, append the following command after Setup.exe, separated by a space:
TRANSFORMS=path\TermSrvr.mst

where path is the location where you copied TermSrvr.mst.

Note You must surround the path and the file name Termsrvr.mst with quotation marks if a space exists to the path to the file. However, it is easier to place Termsrvr.mst in the root of the drive to access it. For example, you can place Termsrvr.mst in the root of C:\ and type transforms=c:\termsrvr.mst.
Click Next.
Type your customer information, and click Next.
Accept the End User License Agreement, and then click Next.
Click Install Now.
When prompted that the installation completed successfully, click OK, click Next, and then click Finish.
Note You must be physically at the computer that is running Terminal Server in order to perform these steps. Running Office Setup from a remote client is unsupported.

For additional information about how to install Office 2000 with Terminal Server, click the following article numbers to view the articles in the Microsoft Knowledge Base:
217640 OFF2000: Setup Fails When Installing on a Windows Terminal Server

222303 OL2000: Installing Outlook to Run from Terminal Server

243788 OFF2000: How to Install Disc 2 on Windows Terminal Server

242504 OFF2000: Unable to Use Office After Enabling Terminal Services

REFERENCES
For more information about the Microsoft Office XP Resource Kit, visit the following Microsoft Web site:
http://www.microsoft.com/office/ork/

The information in this article applies to:
Microsoft Office 2000 (Setup), when used with:
the operating system: Microsoft Windows 2000Last Reviewed: 10/22/2003 (3.0)
Keywords: kbhowto kbpubtypekc kbmsccsearch KB224313