On "XP", the \system folder should be here:
"C:\Documents and Settings\All Users\Application Data\Intergraph CAS\CAESAR II\5.30\System"
You must have a \system folder, otherwise CAESAR II won't work. (Be careful with the above path, sometimes "application data" is hidden.) You should also have a default "caesar.cfg" file in \system.
If you can't figure this out, open a Support Request (SR) on eCustomer, and refer to this thread.
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Regards,
Richard Ay - Consultant