Here is the patch I applied to INSTALL.
1999-10-22  Vin Shelton  <acs(a)xemacs.org>
	* INSTALL: Added more information about README.packages, and
	re-numbered some bullets.
--- INSTALL.~2~	Thu Oct 21 17:39:26 1999
+++ INSTALL	Fri Oct 22 08:14:47 1999
@@ -89,6 +89,11 @@
 More information and suggestions for which packages to install see the
 file README.packages.
 
+IMPORTANT! The file README.packages contain information vital to have
+a fully working XEmacs. This information was not included in this file
+only because it is too large for this terse INSTALL.  Please read
+README.packages now!
+
 By default, packages will be searched for in the path
 
~/.xemacs::$prefix/lib/xemacs-${version}/mule-packages:$prefix/lib/xemacs/mule-packages:$prefix/lib/xemacs-${version}/xemacs-packages:$prefix/lib/xemacs/xemacs-packages
@@ -401,7 +406,7 @@
 same configuration.  If `configure' exits with an error after
 disturbing the status quo, it removes `config.status'.
 
-4) Look at `./lisp/paths.el'; if some of those values are not right
+5) Look at `./lisp/paths.el'; if some of those values are not right
 for your system, set up the file `./lisp/site-init.el' with XEmacs
 Lisp code to override them; it is not a good idea to edit paths.el
 itself.  YOU MUST USE THE LISP FUNCTION `setq' TO ASSIGN VALUES,
@@ -424,7 +429,7 @@
 XEmacs cannot detect, you may need to change the value of
 `directory-abbrev-alist'.
 
-5) Put into `./lisp/site-init.el' or `./lisp/site-load.el' any Emacs
+6) Put into `./lisp/site-init.el' or `./lisp/site-load.el' any Emacs
 Lisp code you want XEmacs to load before it is dumped out.  Use
 site-load.el for additional libraries if you arrange for their
 documentation strings to be in the lib-src/DOC file (see
@@ -443,12 +448,12 @@
 The `site-*.el' files are nonexistent in the distribution.  You do not
 need to create them if you have nothing to put in them.
 
-6) Refer to the file `./etc/TERMS' for information on fields you may
+7) Refer to the file `./etc/TERMS' for information on fields you may
 wish to add to various termcap entries.  The files `./etc/termcap.ucb'
 and `./etc/termcap.dat' may already contain appropriately-modified
 entries.
 
-7) Run `make' in the top directory of the XEmacs distribution to finish
+8) Run `make' in the top directory of the XEmacs distribution to finish
 building XEmacs in the standard way.  The final executable file is
 named `src/emacs'.  You can execute this file "in place" without
 copying it, if you wish; then it automatically uses the sibling
@@ -512,18 +517,18 @@
 the command.  See the section below called `MAKE VARIABLES' for more
 information on this.
 
-8) If your system uses lock files to interlock access to mailer inbox files,
-then you might need to make the movemail program setuid or setgid
-to enable it to write the lock files.  We believe this is safe.
+9) If your system uses lock files to interlock access to mailer inbox
+files, then you might need to make the movemail program setuid or
+setgid to enable it to write the lock files.  We believe this is safe.
 The setuid/setgid bits need not be set on any other XEmacs-related
 executables.
 
-9) You are done with the hard part!  You can remove executables and
+10) You are done with the hard part!  You can remove executables and
 object files from the build directory by typing `make clean'.  To also
 remove the files that `configure' created (so you can compile XEmacs
 for a different configuration), type `make distclean'.
 
-10) You should now go to the XEmacs web page at 
http://www.xemacs.org/
+11) You should now go to the XEmacs web page at 
http://www.xemacs.org/
 and decide what additional Lisp support you wish to have.
 
 MAKE VARIABLES
@@ -664,13 +669,13 @@
 `src/config.h', and change the two `#include' directives to include
 the appropriate system and architecture description files.
 
-2) Edit `./src/config.h' to set the right options for your system.  If
+3) Edit `./src/config.h' to set the right options for your system.  If
 you need to override any of the definitions in the s/*.h and m/*.h
 files for your system and machine, do so by editing config.h, not by
 changing the s/*.h and m/*.h files.  Occasionally you may need to
 redefine parameters used in `./lib-src/movemail.c'.
 
-3) If you're going to use the make utility to build XEmacs, you will
+4) If you're going to use the make utility to build XEmacs, you will
 still need to run `configure' first, giving the appropriate values for
 the variables in the sections entitled "Things `configure' Might Edit"
 and "Where To Install Things."  Note that you may only need to change
@@ -769,6 +774,10 @@
 
 
 PROBLEMS
+
+The most likely problem is that you forgot to read and follow the
+directions in README.packages.  You can not have a working XEmacs
+without downloading some additional packages.
 
 See the file PROBLEMS in this directory for a list of various
 problems sometimes encountered, and what to do about them.