I got a very similar issue on one of my client's machines; the fix was to un-install the KB update. We had antivirus disabled. We could not install anything on that machine until we un-installed the KB update. The error we got from the installer was something like "error: object not found", and unfortunately I didn't save the msi LOG. But, it looked very similar to the OP - I found this thread by searching the net for some excerpt from my msi LOG.
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