Upon installing SP3 for Win2K, some people have reported errors using the Windows Installer service. I have encountered this issue when trying to install VDMSound. Here is one possible fix (use with caution!):

1. Run msiexec.exe from the command prompt to verify the version, if there is no dialog box but instead an error in the NTVDM, then continue with these instructions.
2. Download InstMsiW.exe from Microsoft.
3. Extract InstMsiW.exe using WinZip or a similar tool.
4. Check and write down the versions (via the properties of file) of the following files in the C:\WINNT\SYSTEM32 directory:
   msi.dll
   msiexec.exe
   msihnd.dll
5. In step 4, msiexec.exe should not have reported a version but instead appeared as a 16-bit program (DOS).
6. From the extracted contents of InstMsiW.exe, copy msiexec.exe over the old copy (be sure to backup the original msiexec.exe first).
7. Run the following commands (Start Menu > Run):
   msiexec /unregister
   msiexec /regserver

For details see http://www.sourcewave.co.za/news.htm [29 August 2002].
(Info was from Vlad, I just posted it *heh*-NSG)