That's because there exists a 2 GB limitation with LEGO Racers 2.
Workarounds (in order of "best bet" to "do not try this"):
Windows 8 specific workaround:
If that fails to work for you for some reason, or you're using a different version of Windows, keep reading.
For LR2, I discovered that if you run Win8 and set the installer to run in Win7 compatibility mode, you can bypass the 2GB RAM limit and avoid any UAC and Compatibility messages. Running it normally, however, brings up the RAM error.
1. Download le717's: "Click-And-Go LEGO Racers 2 Alternate Installer. Just supply your disc, and it will install."
2. It has been confirmed that running the installer in Windows 98/ME compatibility mode will bypass the 2 GB RAM limit issue.
4. Take out all extra sticks of RAM until you have two or less GB in your system.
If you are trying to install LR2 on a computer that has more than 2GBs of RAM, the installer will fail, but to limitations in it. But, there is a way to install the game on a computer with more than 2GBs, and without having to mess with boot.ini.
That is a Microsoft forum thread that I found while waiting for LR1 to arrive.
Ignore the best answer, because that is not why I posted that link. Scroll down to a post made by someone named. "No.Compromise" They give a way to lower the amount of RAM windows used without pulling out the sticks. Then, scroll down and look for another post made by "lukechip". He tried it, and it worked for him.
You should also try this, and let us know what happens.
5. Mess with boot.ini. DO NOT DO THIS. VERY DANGEROUS. USE ONE OF THE OTHER ONES.