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Originally Posted by junebug
Thank you so much! I've spent all day trying to find this answer, including searching Microsoft and their confusing answers which didn't work. This was fast and it worked right away. You're a genious! 
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I had exactly the same problem earlier this past week and the only thing that resolved the problem was uninstalling Win XP Pro SP3 (through the Control Panel's "Add or Remove Software" and rolling back to SP2. Then once I verified that the system was stable and installer was working, I reinstalled SP3 and then reapplied all of the missing service patches (don't allow Windows automatic updates - I do them manually).
To determine which security patches you need, you can download a free, browser-based program called Belarc Advisor, which will scan your system and provide you a detailed listing of your system configuration. You can download the Belarc app from this link:
http://www.belarc.com/Programs/advisor.exe
System is working fine now.
Good luck.