Setup file is just a small executable which goes through the lengthy download of the game's core files, installs, then downloads each subsequent patch until current.
By no means a lengthy process, which can result in hung downloads, corrupt files, and repetition.
An ISO download is an image of the entire game which can be burnt to a disc, or its even more reliable counterpart, they print a disc and send it to those who front the cost of the disc. Minimal time risking a download interrupt, fast reliable source for reinstallation.
Ask yourself what steps you would need to do to play XIV in 1.0 if you lost the disc. Compound that with 2.0 not even having a disc provided (unless you pay for the game again), and I'm looking for 1 or 2 simple, reliable alternatives.