The best way to disable the factory alarm is to ground the hood switch input to the door lock/alarm ecu. On my '97 that is a grey wire. This is also what Toyota does when installing a keyless entry system (which has its own security ecu).
If you want to retain the hood sw in your system, cut the wire near the alarm ecu, ground it, then re-hook the hood sw wire (other side of the circuit) into your system. If you aren't comfortable doing this yourself, try to find a GOOD installer in your area - others on the list may be able to direct you to a reputable shop.