It gives you this exact error?
kinst.chd NOT FOUND
ERROR: required files are missing, the game cannot be run.
So, to reiterate:
1) your setup is *something* like this:
C:\MAME
mame.exe
C:\MAME\ROMS
kinst.zip
C:\MAME\ROMS\KINST
kinst.chd
2) Your ROMpath in your mame.cfg is set to your ROMs folder(s)
Double check all of this. I'm still convinced you missed something somewhere.
Edit: are you using the DOS version, or the Windows version? There *is* a difference, a big one.