Hi David,
XP is completely updated and includes SP3. Office (Ultimate 2007) is being installed from CD.
I boot into XP the insert the Office CD which requests the product key. I enter the key, click okay, accept the software license terms and it starts installing (The installaiton progress window). Then the message "Microsoft Office Ultimate 2007 encountered an error during setup" appears about 30 seconds into the installaion.
My Event Viewer indicates Event ID 1014, Windows Installer Proxy info not correctly registered and Event ID 1015, Failed to cnnect to Server. (0x80004005)
I hope that this helps.
Russ