Windows Installer service issues
The Windows Installer service adds, modifies, and removes any applications that are provided as a .msi package. If this service is disabled, any services that depend on it fail to start.
 

1. Click Start, Run, type services.msc, and click OK.
   
   NOTE: For Windows Vista users, click Start, type services.msc, and press Enter.
    
2. Right-click Windows Installer service and select Properties.
3. Select Automatic from the Startup type drop-down list, and click Start.
4. Click OK.
5. Try the installation again.

If you receive the same VSE installation error, the Windows Installer service could be corrupted. See the following Microsoft article for assistance in repairing the Windows Installer service: http://support.microsoft.com/kb/315346.
 

Network-related issues
Running the installer from a network location can introduce issues due to permissions or network connection problems. Copy the installation package to the local computer, and then run the installer.
 

Third-party AntiVirus (AV) Terminate and Stay Resident (TSR) program
Remove all third-party AV products before you install VSE.