Perhaps you have a bad download, maybe you could try the compatiblity wizard who-jit. Ill look through the help file and report back with any ideas.
EDIT - Heres list of possible problems and solutions taken from the support site:-
0. This may require manual installation of Windows installer 2.0
1. Make sure Idriver.exe is not running (Use Ctrl-Alt-Del to view Task Manager, and look for IDriver.exe under "Processes". If it is running, end that Process.
2. Make sure Installing location/destination from/to is not unwritable/ unreadable, and that there is enough disk space etc.
3. Conflicting applications running/system files locked - solution close apps before running install
4. Make sure SP 2 installed (Win 2000), and if still fails, reinstall Service Pack 2. (or later if it exists)
5. run the .msi file, instead of setup.exe
6. Run 'instmsiw.exe' as mentioned above in order to correct dodgy WI install
7. NTFS partition installed with the short file name creation disabled?
In registry:
(HKEY_LOCAL_MACHINE\SYSTEM\CurrentControlSet\Contr
ol\FileSystem\NtfsDisable8
dot3NameCreation)
8. Go to Control Panel->Administrative Tools->Services and stop the windows installer service before installing instmsiw.exe
9. Make sure that the system C:\winnt or C:\windows or C:\windows\installer directory (or equivalent) is not using NTFS encryption. Right click the folder name and choose properties. At the bottom of the General Tab is the "Advanced" button. Click it, make sure that "Encrypt contents to secure data" is unchecked.
10. Make sure in the registry
HKEY_LOCAL_MACHINE\SYSTEM\CurrentControlSet\Servic
es\MSIServer\ImagePath
reads similar to
C:\WINNT\System32\MsiExec.exe /V
The difference being the possible location of the system "C:\windows" instead of "C:\winnt" for example
11.
** In my case this one was the problem **
Make sure that the hidden directory C:\winnt\Installer is not encrypted and that the security settings on it allow for the current system user to have full control. (If administrator, make sure it hasn't inadvertantly locked you out as well). To do so, right click on the C:\winnt\installer folder (You may have to turn on view hidden files in Tools->Folder options in explorer.. Look under the view tab.) Go to the security tab and make sure the user in question has full access to this folder. (Note is it possible that the Administrator account could lock this folder, this would require the action of unlocking it through the tab before it can be used).
To be sure you can
Start->Run "cmd" to bring to the command prompt.
Type:
--
C:\winnt\system32\cacls "C:\winnt\installer" /T /E /G Everyone:F
cd\
C:\winnt\system32\cacls "C:" /E /G Everyone:F
---
You may need to replace "C:\winnt" with the location of your os files. ie "C:\windows" etc.
12. Reinstall Service Pack 2. It can be obtained from
13. Try another application that uses Windows Installer 2. Microsoft Office XP, DirectX8 SDK, etc and any installer developed with Installshield 7.0 or higher)
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