«

[The Fifth Horseman]

I was wondering if someone could explain to me what the ISO Cellar is, and also if the full version of Lion with sound is indeed located there?

The ISO Cellar is a secret forum to which users gain access after they have been actively participating in discussions for a while.
Your account will first have to be fixed to work correctly, however, and it can't be done right now since the access to the admin controls is buggered to hell.
But yes, there is a full version of Lion in the ISO Cellar.

running the setup.exe causes it to say that it cannot be installed to C; "The specified path (C:\Lion) cannot be created."

Do you actually have a C mount configured? I'd guess not...