I’ve had the “Access Denied” error on two machines when I tried to install Windows XP SP3. The real bummer is it happens about halfway through the installation, and you’ve invested a pretty good amount of time just getting to that point.
I’m not sure what causes the error, but since both machines were development machines, it may be connected to the use of aspnet_setreg or similar security measure. At the day job, the network guys have installed SP3 on over 125 other machines without incident.
The fix discussed below worked on both my machines: