Software installation disabled

In Firefox 1.0.x the option to allow web sites to install software is found under "Tools -> Options -> Web Features -> Allow web sites to install software". Starting in Firefox 1.5 the option has been removed from the user interface (UI). The software installation option must be enabled to allow installation of themes, extensions and certain plugins that use the XPInstall method.

If you click a web site's "Install" link and you see a message bar that says "Software installation is currently disabled. Click Edit Options... to enable it and try again.",

• Firefox 1.0.x: Click the "Edit Options" button to open the Web Features preferences panel, place a checkmark in front of "Allow web sites to install software" and try again.
• Firefox 1.5: If you previously disabled this option and then updated to Firefox 1.5, the disabled setting will be carried over. Since the option to enable software installation no longer exists in the UI, you will need to use about:config to reset the "xpinstall.enabled" preference to the default "true" value (bug 310737). These step-by-step instructions should fix the problem:

1. Type about:config in the Location Bar and hit enter.
2. Type xpi in the Filter box and find xpinstall.enabled in the list.
3. Make sure its value is set to "true" (double-click will toggle).

(Some users may have disabled the software installation option based on security issues which have since been resolved [1]. To reassure, software cannot be automatically installed without first being granted permission via the "OK, Cancel" installation dialog, which has a two-second delay before you can select "OK".)

Note: Updating of themes and extensions will hang indefinitely, with no user feedback, if software installation is disabled bug 288054.

More possible reasons at:
http://kb.mozillazine.org/Unable_to_install_themes_or_extensions_(Firefox)