Setup.exe does install the packages, and it appears they work.
 However, they
 cannot be configured via the menu entry "Options,  Advanced(customize), 
You may be looking under the wrong menu. Try something like M-x customize
<ret> toolbar <ret>
to see if that works.
 Emacs, Packages." Moreover, the menu item "Tools, Packages,
List and
 install" doesn't work at all. 
Can you define "not at all". You need to define a download site first before
using these menu items.
 Setting EMACSPACKAGEPATH to "D:\cygwin\usr\local" makes
some difference. 
EMACSPACKAGEPATH is already set by the installer in the windows registry.
 "Tools, Packages, List and install" will load *packages*,
but there are no
 installed versions, only latest versions. After selecting some packages to
 install and doing "Install/Remove packages," the message "Unable to find
 file <x>.tar.gz," where <x> is one of the package files
 previously selected.
 On the other hand, after this failed attempt to List and install, the menu
 entry "Options,  Advanced(customize), Emacs, Packages." does work. 
List & install uses the MANIFEST entries, so it seems something fundamental
is going wrong here. This works for most people.
andy