It breaks the user profile information out of the %SYSTEMROOT% tree and into a top-level directory called "Documents and Settings", located on drive C: usually.
But as for people who have Software-With-No-Obvious-Purchase-Order-Number installed, they're screwed and they're going to get more screwed with the arrival of Office and Windows XP.
The reason you have to install O2K from the original media is that you've destroyed the MSI entries in the registry; now O2K doesn't know what's installed and what isn't, so you have to reinstall it.