I installed it using some XP installer program that I found on the internet and I can get the game to run using DOSbox, but it doesn't have sound. In the setup utility for the game I'm unable to get the sound test to work unless I start the progam using "VDMSound" -- I'm not really sure what that is, but it let me set the sound options and the test was successful, so that was exciting for a second. The thing is, I can't open the game with VDMSound because it just says it can't find the CD. I'm wondering if I need to run the setup from DOSbox, but I can't figure out how. I'm not very good at this sort of thing.

Does anyone have any tips?

The easiest way to get daggerfall running on a modern pc is to install and run it
with dosbox. Follow freddo's guide at the top of the forum and you should get Daggerfall working perfectly.
Dosbox is a lot better than using VDMsound and the DAGNT5X installer because it emulates a complete DOS computor with the correct cpu speeds and all the sound cards that were available at the time.

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Follow Hoot's advice, but you can still use the install you made with the XP installer. You just have to make sure that the z.cfg settings are correct. So just place it in the most convenient way to reach in Dosbox.

Well I got Daggerfall to work . . . and I lost already. I got eaten by a killer shrew in the second room of the tutorial. The tutorial didn't tell me how to get a weapon until I was half dead. And it never did tell me how to hit an enemy who is hiding behind the buttons on the bottom of the screen. Can you lean over?

Go into the options to change it the mouse camera movement mode (if this is what you mean) it's how modern games are controlled (eg Morrowind, Oblivion... looking around).

The Delete Button My Friend.