So, I appear to have run into the infamous "not enough storage" issue during installation. I have about 200 gigs free, and the game says it only takes up about 23GB. How do I fix this?

What file system are you using. There are problems if you try to install the game on a FAT 32 partition.

I'm not sure what it is, but I have installed the game before on the same machine without any error.

Also in the same location? Try installing on C:\ in a subfolder like C:\Games.

Check the type of your file system by opening the Windows Explorer, right-click your harddrive C: and select Properties.

It should be NTFS (if you're running Windows).

File system reads out as NTFS. Tried installing it into a different base folder, nothing. And I tried installing it to the same folder as the 1.0 installer, also nothing.

Have you tried to keep it simple and installed it just to a subfolder of C:\

If you haven't, there are other possibilities that could cause problems, like symbolic links.
Further, Windows allows to limit the space to use on one disk. Check if there's a so called disk quota set.
Here are some related tech infos:
http://technet.microsoft.com/en-us/magazine/dn456536.aspx
(scroll down to "Configure disk quotas")

Is there anything unusual in your configuration harddisk wise?
Which Windows version do you use?

I'm using Windows 7 32-bit, exact same operating system as the last time I successfully installed it. There are no disk quotas set, and installing it in c:/The Witcher 2 Enhanced Edition didn't work either. The only thing I changed since the last time I installed it was that I had to run a hotfix for Batman: Arkham City which required me to allocate more memory for use. I'm going to try running it as admin, see if that helps any.

Edit: Running the installer as admin appears to have worked, no install errors occured. It DOES take almost 40 minutes to install, though, but I'm guessing that's normal.