Actually, just makes me think of one more thing you should check (in addition to Windows Event Log data) about Windows Installer: Windows Installer is, itself, installed as a Windows service.

>> So, Let's check if Windows Installer is already defined as a service (or not) and what properties it is assigned! (do this in addition to checking/supplying info from Windows Event log)

1) Download Serviwin (very handy tool for viewing and managing Windows Services and Drivers)

2) Run it and click View->Services
3) Scroll down to look for Windows Installer (it's a row where column Name=MSIServer and Display Name=Windows Installer)
4) Does it exist? Simply select the row, click Ctrl-C to copy it, then Ctrl-V to paste into and include it in next post

We have seen this issue many times.
We have resolved this problem by undeleting Internet Explorer 8.0 and 7.0, and returning to 6.11, then defragmenting, then removing the other updates that Windows gives you permission to remove... then defragment once more, then reboot and reinstall.

Strange, but it worked easily once we got the hang of it...

Then run your updates normally... including installer.

Thank you for everybody's responses...

I'll try all the methods listed...

Once again, thank you

MSIServer Windows Installer Stopped Manual Normal RpcSs Adds, modifies, and removes applications provided as a Windows Installer (*.msi) package. If this service is disabled, any services that explicitly depend on it will fail to start. C:\Windows\system32\Msiexec.exe 6/9/2009 11:15:38 PM

That's what I copied and pasted from ServiWin. I haven't done anything because of summer school...
Also...when I looked through the directory: C:\Windows\system32\, I could not find Msiexec.exe... so does that affect the setup process?

msiexec.exe should most definitely exist. Click see post about how to
1) Double check if it's there and determine its version if its found
2) Use the download links provided to download MS Installer and either reinstall v3.1 or try installing the newer v4.5

Msiexec.exe isn't there though... And if I am using service pack 3, can I still use older versions of windows installer? Or does it have to be version 4.5?

you should be able to use either with XP

There are some (a very few so far) of the components and updates Microsoft which will require the new installer, but we do not have a list. There are none that we use. They include some of the latest releases of Windows Live, Office 2007 section Service packs Sliverlight 3, and some of their system tools... But microsoft will automatically update you to the latest installer if needed for installs. it is clear that Microsoft intends to have the new Installer be controlling for all new issues.
No other products we know will require the new installer....
There are no issues reported that would make one avoid the new installer... other than the standard stuff

Should I just repair install Windows XP again? Because it at least installs Windows Installer... even though it doesn't really install successfully...?

I don't have a suggestion on this... other than that I would like to find the underlying problem... I guess I would want to run a clean install... I repair install might work, but then perhaps it will only delay a better, and permanent, resolution. We suppose you have a lot of valuable data installed...
Could you consider installing to a new hard drive so as to save your current data and communications data?

If a repair install does not work, then I guess I'll have to do that... thank you for your answers

1) It's not clear from your answers if you've also tried the MSI v4.5 package?
2) You can also have a look here

Raybay, you say
Referring to things that require MS Installer v4.5 you say "They include some of the latest releases of Windows Live, Office 2007 section Service packs Sliverlight 3, and some of their system tools... " Really??? I say "Huh?"
1) MS currently has NO plans to distribute MS Installer v4.5 to XP unless it decides to release an SP4 (in which case it will be included in SP4)
2) MS Installer v4.5 is optionally available to XP users to fix problems with MSI v3.1

So from all your experience you try to quote, could you please provide any link (even just ONE will suffice) to any of those MS tools or software for you claim XP requires installer v4.5 as you state?

I am trying to install MS Installer v4.5, I first tried uninstalling MS Installer, so would that delete Msiexec.exe, and what exactly does Msiexec.exe do... because I could not find it on my computer...

1) Msiexec.exe is the MS Installer executable file. So if it's missing from its usual spot under C:/Windows/System32 would certainly be one reason the MS installer can't run!
2) Exactly, what type of errors/error messages do you get when you try to install MS Installer?

And, at some point you might decide, it might be easiest for you to just backup all your stuff and then use your installation CDs to either
>> Do a repair install (where Windows tries to fix a corrupt installation) or
>> Simply reformat and do a full re-install. Also see this post for some suggested Steps to prepare before doing a full reinstall

1) Msiexec.exe is missing from C:/Windows/System32
2) When I try to install, it goes through everything... I click next, then it has the blue bar thing, but after a while, something pops up with a red circle with a white X in the middle, saying "Access is denied." After I press "OK" I get KB942288-v3 installation did not complete. Select 'OK' to undo the changes that have been made. I press "OK" and it reverts the changes...

I'll probably do a repair install sometime soon...

Repair install will probably your best bet at this point. Tho one other thing does come to mind (based on your description).

Does the message give any indication as to what is getting "Access Denied"?? (e.g. could it be a registry entry?)

Point being that the "real-time" protection feature of your antivirus might be interfering and "denying access". Do you know how to turn real-time protection off in your A/V?

You may want to try
>> Download (and SAVE) the installer file.
>> Turn off your A/V real time protection
>> Run the installer
>> Turn your A/V real-time protection back on
AND/OR just be sure you have all your stuff backed up and then do the repair install!