It is local Ext2 partition system accessible through http://www.fs-driver.org/ on the same HDD as primary system partition. But there is definitely issue with difference between drives.

There is no problem if the package is executed from the NTFS system drive - permissions asked as expected, no errors. On the Ext2 partition VLC and other installers that require elevated privileges fail. I do not remember any such problems last year, but it just can be that most applications on this drive are not windows specific or do not require elevated privileges.

I still doesn't explain why this drive is threatened as "network". It would be nice to see how Windows treats other partition types - FAT32 or FAT16.