There are three "servers" used in NAV context:
* Dynamics NAV Database Server
* Microsoft SQL server
* Dynamics NAV Application Server
First of all if you just want to look at demo version you haven't install any servers. It will be enough if you install classic client.
If you want to install Dynamics NAV Database Server you should use manual "Installation & System Management: C/SIDE Database Server for Microsoft Dynamics NAV" (w1w1ism.pdf)
xp_ndo.dll - is component required when you decide to use SQL Server, so you shouldn't register it. It uses in another way (look at w1w1isql.pdf for more information)
And what about your error. As far as I can remember it appears when you try to use Dynamics NAV Application Server. This server used just for integration NAV with SharePoint, ADCS etc. And this server isn't necessary for demo. Manual for this server is w1w1atas.pdf. Application Server requires NAV Database Server or SQL Server.