Moreover, when you click OK it tells "That's not the master disk!".
You probably installed the game to a floppy disk. You don't need to install the game. Uncompress the archive you downloaded to a folder on your hard disk and execute DM.EXE. Everything should work fine.
Note: It is possible to play Dungeon Master for PC from the floppy disk, but the floppy disk MUST be called "DM" otherwise the game will keep asking you to insert the correct disk in the drive. If your PC has a second floppy disk drive, you can use it to save your game (tested under windows with a USB drive). [Information supplied by Johnny Grasset]