I too had this problem which was resolved with the following...After insuring that the Office Source Engine was indeed running (it had been stopped), I tried installing the update and VOILA! It installed without difficulty.
RESOLUTION
To resolve this issue, perform the following steps:
If the Office Source Engine has been stopped or disabled
1.. Log on with Administrative privileges.
2.. Right click on My Computer.
3.. Select Manager.
4.. Click on Services and Applications.
5.. Select Services.
6.. Find Office Source Engine and enable the Service.
If the Office Source Engine has been deleted
1.. Log on with Administrative privileges.
2.. Run Setup (setup.exe) for Office.
3.. Select Repair or Reinstall, and then click Next.
4.. Select Reinstall, and then click Install.
5.. Complete the installation for Office.
I cannot install update KB911961. I have tried numerous times. I temorarily
disabled my firewall and anti-virus software, but still it will not install.
Any help will be appreciated. Thanks