This is an old XP article but it might be suggesting that there is an access permissions type of problem?
You receive an "error 1603: A fatal error occurred during installation" error message when you try to install a Windows Installer package
http://support.microsoft.com/?scid=kb%3Ben-us%3B834484&x=11&y=7#appliesto
Can you start the install by right-clicking on any .exe and selecting the "Run As Administrator" option? What is the file extension of the install file? .msi or .msu will need a different approach.
Use the Vista instructions in this to reset to default the security settings.
How do I restore security settings to the default settings?
http://support.microsoft.com/kb/313222/#appliesto
Solving setup errors by using the SubInACL tool to repair file and registry permissions