First unpack bl2-10.zip in C:\Linux, than restart in true DOS mode. Go to C:\Linux (C:\> cd c:\linux) and run boot.bat (C:\> boot). Setup will create 4MB ramdisk and install Besic Linux there.
You have to do this every time you want to use Basic Linux.
Tips:
Every time you shutdown your Linux the memory will be formatted, so you will lose any data (config files,new programs you installed etc.).
You can store your data on your hard disk. There it will be safe. To do this mount your windows partition in /hd ($ mount /dev/hda1 /hd). Change hda1 with your win partition. Make a dir called /baslin. Than save all your data and /etc folder there.
Next time you start Basic Linux copy the /etc folder from /win/basiclin to /etc. You will work with your old settings. You can do this with /usr folder too.