Gamemaster406, it means that CFS3 ETO expansion 1.0 must be started in Era 1 and exited before installing CFS3 ETO Expansion Cumulative Update 1.20. You should also set the ETO Spawn Selector to 1 before installing 1.20.
Here is the full procedure for installing ETO:
1. You need a clean, fully-updated (3.1 and 3.1a) vanilla (unmodded) install of CFS3 in order to install CFS3 ETO Expansion Rev 1.0.exe.
2. Install CFS3 ETO Expansion Rev 1.0.exe per readme instructions. After ETO 1.0 has been installed properly and run at least once, start it again in Era 1 and exit, then set the ETO Spawn Selector to 1.
3. Now install CFS3 ETO Expansion Cumalative Update Rev 1.20.exe per readme instructions. After this, you should be good to go.
Note: Failure to follow the three primary steps above will result in a corrupted, or otherwise messed-up ETO install.
I hope this helps.:d