This is the first time I have come across this, and I have been doing SQL work for some time. I was consulting on a SQL Server install on a Windows Server 2003 R2 box. Anytime you tried to install SQL it would fail. It turned out someone had enabled the DisableMSI registry key. This key will prevent any .MSI installation from running.
The fix.
Go into the registry and set DisableMIS key located in HKEY_LOCAL_MACHINE\Software\Policies\Microsoft\Windows\Installer to 0
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