I'd go for the smaller download, I think.
I would suggest having a "splash instruction manual". Explain on the first page that you're installing the application, and then start providing simple instructions. Importantly, allow the user to go back and forward on the instructions - don't make it like the installers which give you one splash page after another, without any control over what's going on.
During the installation, have a bar at the bottom (or something similar) indicating progress... and when the installation is complete, turn this into a "launch" button so that the user can finish reading the instructions before launching, if they want to.
I'm not an HCI expert by any means, but I think that's what I'd want.