I used the EXE installer and told it go modify all modules if found (and to go ahead and work on conflicts during the install)
Exe installer (setup3.5rc1a.exe) can't do that. It only extracts PRC files to correct NWN directories. You have to use PRCModuleUpdater to actually install PRC into a module. This is how module updater window looks like:
Use PRC Pack option to install PRC into a module, and later prc_ocfix to install PRC compatibility fixes for Official Campaign modules.
I noticed there was also a file specifically for those using CEP2 called "prc_cep2_merge.rar" and from it's description, I thought I would need it to get CEP and PRC to work together. After opening the readme, it mentions there is an self-extracting version for Windows users, but I couldn't find it.
Yes, that's the PRC/CEP merge hak. You have to extract all hak & hif files to your NWN\hak directory ant *.tlk to NWN\tlk directory. If you made it right another option will appear in Module Updater - prcc2 - use it INSTEAD of 'PRC Pack' option to install PRC & CEP 2 into module (if your module already has CEP installed, you may need to remove cep*.tlk file from custom tlk in Toolset).
I began going through the instructions and noticed there is supposed to be a folder within my Neverwinter Nights folder named "PRCPack", but it wasn't there. If the PRC installer was supposed to put it there, it didn't. Anyway, it said inside that folder was supposed to be an application called PRCModuleUpdater.
PRCPack folder should be located outside your NWN folder. In my case:
NWN dir: e:\NeverwinterNights\NWN\
PRCPack; e:\NeverwinterNights\PRCPack\
That's where the PRCModuleUpdater.exe is. The installer should also create a shortcut to Module Updater on your desktop.
Anyway, it said inside that folder was supposed to be an application called PRCModuleUpdater. I found a download for that on the vault as well (ver. 2.5) and tried to run it, but it keeps telling me "Neverwinter Nights is not installed."
Try running Module Updater with administrator privileges or in XP compatibility mode. Should fix this problem.