Thank you for answering, Paul.
We managed to install SP1 on the test station, but the problem is we want to install SP1 from the server, on 300 stations - we don't want to go in person to each station.
I am looking at a "installer" from PROLIB, hoping it can be run trough server policies. I believe I'll need to make a BAT file in order to call it with command line switches, but I am not yet sure how it works, i.e. where to put the SP1 EXE.

>I had the same problem but was able to fix it by deleting registry keys. Look in the log created by the MSI find the {guid} that it is failing on and search the registry and delete that key. Re-run get next error and repeat.
>
>Unistalling and re-installing did not work for me BTW.. I was cursing myself for ever installing a Beta product on my dev machine. From now on I will use Virtual PC for Beta products.
>
>Anyways hope that helps you.
>
>Paul