1) install the bare system only to a pendrive from the ISO image, using either a physical computer with a DVD or a virtual one straight from the ISO file. You must boot from the ISO/DVD, run InstallAROS, choose to install to a 4 GB (2 GB for light version), clean and unpartitioned USB pendrive, and select "install AROS system files" and "install bootloader" options only. Leave all other options unchecked. Use a single DU0: partition only. Do not create a work partition.
2) run the "Create a USB installation pendrive" script from the root of your DVD
3) wait for all files to be copied
4) Boot up your destination computer with the newly made installation USB pendrive, and start InstallAROS from its Tools directory. Proceed with regular installation as usual.
The whole procedure is described in the Icaros Desktop quick start guide (you can download it from our site, but it is already included in both Icaros versions ISO files), and an already-made virtual machine for VMware is available here. Please read the old notices as well. This is the exact procedure I use to install Icaros to my Acer AspireOne A150 netbook, and it requires about 30 minutes for actual installation (it's quite faster than using a USB DVD player).