I found a solution to this problem. It was a software problem, not
hardware and nothing to do with what was actually being installed. I
was able to solve the problem because I noticed some other symptoms:

I could not run Regedit.exe or Regedt32.exe (there was a message about
adding to the registry instead).

If I right-clicked My Computer ands selected Properties then nothing
happened (the System Properties Window did not open).

I found the solution to this last symptom here and this cured all my
problems

'JSI Tip 5425. My Computer Properties does NOT invoke the dialog box
and other strange behavior?' (http://tinyurl.com/9r6lju)

In my case there was an extra " at the end of the exefile= response but
correcting the registry entry fixed all the problems including the
Windows Installer SDK error message.