Hmmm... that also speaks about a "16 bit MS-DOS Subsystem", but Spybot-S&D is completely without any 16 bit code... from the point where it happened (still during the installation), it looks like the installer wanted to start SpybotSD (you probably did keep the option to start it at the end of the install checked?). That it's pointing to the temp folder doesn't look exactly like this though (and SpybotSD.exe surely is not 16 bit).
Another thing could be that it's the standalone updater (for detection updates) that's downloaded as part of the installation (spybotsd_includes.exe would also be shortcut as spybot~1.exe) - it might not have installed these. But that installer is clearly 32 bit as well.
If Spybot-S&D is running now, I'm quite sure there won't be any further problems (I've heard about this only once, where no later problems appeared). Spooky though... need to give it some more thought...
edit: one more thing: could you please check if the file the error message speaks about still exists? If so, I'll let you know an email address where you could send it (just an idea, but maybe the file gets corrupted in an unlucky way while it gets downloaded (not sure what it takes to let Windows thing it would be a 16 bit file) - update servers are a bit on heavy duty today

).
d:\temp\is-11qiu.tmp\ is gone when I checked.

Yeah, it was a weird one! I don't know if this is related. When I uninstalled v1.4, I was told to reboot but I didn't. I don't know if that was related. I didn't reboot my home machines either.
I used WhyReboot to check my reboot status:
Whyreboot © 2003-2006 Exodus Development, Inc.
http://exodusdev.com
Version 1.0.1.537
NOTE: These results may not reflect all pending operations, and you should use your own good sense in deciding whether to reboot your computer after an install.
Detected Windows NT, 2000, XP, or variant
Results:
REGISTRY: PendingFileRenameOperations
> RENAME C:\WINDOWS\System32\spool\DRIVERS\W32X86\3\New\mdiui.dll to C:\WINDOWS\System32\spool\DRIVERS\W32X86\3\mdiui.dll
> DELETE D:\Documents and Settings\user\stuffXPProSP2.zip
> DELETE D:\Temp\we2648.tmp
> DELETE D:\Documents and Settings\user\1991_appcompat.txt
> DELETE D:\Documents and Settings\user\logs.zip
> DELETE E:\old04dde2cd9c7ad4d8e54793cf06\symbols
> DELETE E:\old04dde2cd9c7ad4d8e54793cf06
> DELETE D:\VMware5images\CleanOS\Windows XP Pro. SP2 (Slipstreamed CD; all updates)\logscrashed.zip
> DELETE D:\VMware5images\CleanOS\Windows XP Pro. SP2 (Slipstreamed CD; all updates)\logscrashed2.zip
> DELETE D:\VMware5images\CleanOS\Windows XP Pro. SP2 (Slipstreamed CD; all updates)\logs.zip
> DELETE C:\Program Files\Symantec Client Security\Symantec AntiVirus\stuff.zip
> DELETE C:\Program Files\Symantec Client Security\Symantec AntiVirus\stuff2.zip
> DELETE C:\Program Files\Symantec Client Security\Symantec AntiVirus\stuff3.zip
> DELETE D:\VMware5images\stuff in XP Pro. SP2 (Slipstreamed CD; all updates)\reg.txt
> DELETE D:\VMware5images\stuff in XP Pro. SP2 (Slipstreamed CD; all updates)\temp.zip
> DELETE D:\Temp\_iu14D2N.tmp
16 items were found and reported.
Nothing odd to me.