Suppose you have a 3 node cluster with Node A, Node B and Node C. Suppose you are doing the installation on node A, then there are 2 places in the installation process where you have to assign Drive letters to the SQL Server files
1. During the FEATURE SELECTION SCREEN, you have to specify the folder location for the SQL Server binaries. The location you specify must be on the local disks.
On the feature selection screen,
Click “Browse” to select directory “SQLBinariesPath\Program Files\Microsoft SQL Server”.
Note that SQLBinariesPath must be either C or D drives. Suppose if you choose D , then the same drive D should also be available on Node B and Node C as their own local drive. Other the failover clustering doesn't work.
2. On the CLUSTER GROUP SELECTION screen , first you have choose a dedicated cluster group (Which is not being Used by any other sql server instances) for the sql server instance you are installing and then
Select DataDrive from available drives in cluster group.
DataDrive can be any drive on the SAN. It must be visible to the other nodes in the cluster. Also LOCAL DRIVES should NOT be used for placing the Databases. If the databases are placed on the local drive like D, the failover clustering will fail.