I had the same problem on my Windows XP Media Center - tried many of the suggestions above and nothing worked. Finally found a suggestion at Microsoft's website to do this and it worked!
Method 1: Unregister and re-register the Windows Installer
Click Start, click Run, type MSIEXEC /UNREGISTER, and then click OK. Even if you do this correctly, it may look like nothing occurs.
Click Start, click Run, type MSIEXEC /REGSERVER, and then click OK. Even if you do this correctly, it may look like nothing occurs, or you may briefly see an hourglass. After you run this command, the operation is complete.
Try your Windows Installer-based application again.
So give that a try - it worked for me.