Possible issue running Xbox 360 PC setup on a Window XP SP3 system with Media Center 2005 installed.
Aaron Stebner from Microsoft outlines an issue with MCE 2005, XP SP3 and setting up extenders:
Recently, I have heard from a few customers who have had an issue installing the Xbox 360 PC setup package in order to configure their Xbox 360 as a Windows Media Center Extender. I want describe the issue, what is happening behind the scenes and how to work around it in case anyone else runs into it in the future.
Description of the issue
The customers I talked to had all previously upgraded to Windows XP SP3, and when they attempted to run Xbox 360 PC setup afterwards, they received an error message that looks like the following:
There is a problem with the installation of Windows XP Media Center Edition 2005. Uninstall the update to Media Center Edition 2005 and then re-install the update from the Windows Update website. Then run Media Center Extender setup again.........................
The full blog post about this issue can be found here.