Some more info for you. Experiencing exactly the same thing here.
If i manually extract, it fails in the same way at the same point as the
execuatble launch.
If i burn the executable to CD and run, it installs fine.
After seeing this i dug out the old XPSP2.exe file to test the extraction,
and this failed half way though. To be safe i did the same process (from the
SP2 CD, not the HDD) and it extracted fine.
Unfortunately, the process of extraction doesn't seem to generate any error
log's in the %temp% dir, only setup error's.
p.s. I'm not using MCE, im on XP Home with a VIA VT8237R chipset and a SATA
HDD. I don't believe this problem existed (or atleast it wasn't reported)
with an IDE drive in the system, but i'm just about to ghost back to an IDE
drive to test this theory.