I thought you had the option during setup to skip the device setup. I just tried on a VMware Windows 7 image and had no problems at all! I used the link
http://download.kobobooks.com/deskto.../kobosetup.exe which gave me 2.1.3
No prompt at all to do device setup; it just prompted me to either create an account OR signin with an existing account.
Currently it's happily download all my books!
Do you happen to have any USB devices drives attached while doing this? I have none attached at this time.