1601 NT ARC firmware has no hard disk setup. The Windows cdrom has no arcinst.exe!
You need to create partitions manually on a Moto PowerStack system.
You will be tempted to use "Create PowerPC Boot Partition" from hard disk setup.
But thats NOT IT. Instead use "Create FAT Partition" and then you will be prompted
to designate it as a system partition. Thats the one. PowerPC Boot Partition is not
NT system partition. Furthermore an empty partition will not be recognized as system
partition, it needs to have \os\winnt40\osloader.exe and bunch of other files. The
safest way is to start installing the system on PowerStack and then transfer over
to 1601.

Also MVME 1601 NT ARC is looking for a system partition created by NT 3.51.
In order for 4.0 setupldr to recognize it during install you need to create a boot
entry to point to right folder (winnt40 instead of winnt351).

Note parition order. System partition is the same where osloader.exe is located.
Osloader partition is where \WINNT folder is located:

SYSTEMPARTITION=partition(1)
OSLOADER=partition(1)\os\winnt40\osloader.exe
OSLOADERPARTITION=partition(2)
OSLOADERFILENAME=\WINNT

To install NT, run program cd:\ppc\setupldr or express setup on powerstack