On Windows XP SP2 I have run across this error a few times. Typically it is an unhandled exception in C:\Windows\msiexec.exe when trying to open Outlook for the first time. Detect and Repair Outlook (or other Microsoft Office applications returns the same error. No Office Updates will install.
I never determined the exact cause of the error but the following steps solved it.
I believe this is corruption in the .NET framework somewhere along the way that breaks the C++Runtime Library.
Here are the downloads:
1.0 http://www.microsoft.com/downloads/details.aspx?FamilyID=d7158dee-a83f-4e21-b05a-009d06457787&DisplayLang=en
1.1 http://www.microsoft.com/downloads/details.aspx?FamilyID=262d25e3-f589-4842-8157-034d1e7cf3a3&DisplayLang=en
2.0 http://www.microsoft.com/downloads/details.aspx?FamilyID=0856eacb-4362-4b0d-8edd-aab15c5e04f5&DisplayLang=en
3.0 http://www.microsoft.com/downloads/details.aspx?FamilyID=10cc340b-f857-4a14-83f5-25634c3bf043&DisplayLang=en
To turn off safe mode if you used MSConfig:
NOTE: If the ESC key is pressed on either machine Remote Control will be lost and the machine you are connecting to will have to accept it again. The ESC key cannot be pressed in key combinations (i.e. CTRL+ESC will stop remote control). Likewise a reboot will require steps 3-6 be repeated.
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