Hi,
When you try to run “Games for Windows Software Setup 3.5” or “gfwlivesetup.exe”, it will search for the older version “Games for Windows Software setup 3.0”. You have to have this version working because “Games for Windows Software Setup 3.5” upgrades users to the newest version.
Also, you receive this error “The feature you are trying to use is on a network resource that is unavailable” when you are installing the Windows live feature from a resource, such as a network server, that becomes unavailable during the installation.
I would suggest you to try the steps mentioned below.
Method 1:
Download the update manually and install it by putting the computer into a clean boot
To download the client update, click Games for Windows Software Setup 3.4. Once you download the update completely, try to install it by setting the computer into a clean boot.
Perform a Clean boot
http://support.microsoft.com/kb/929135/en-us
Note: Once the troubleshooting is over, reset the computer to start as usual.
Method 2:
Disable your anti-virus software completely and then install the update
http://windows.microsoft.com/en-US/windows7/Disable-antivirus-software
Note: Once the troubleshooting is over, re-enable your security software.
Method 3:
Perform a system file checker and then check if you’re able to update
http://support.microsoft.com/kb/929833/en-us
If you still have problems installing, then you might have to repair the older version of Windows Live to get the upgraded version to work. I would suggest you to visit the link below for further assistance.
Games for Windows Live
http://www.microsoft.com/games/en-us/support/pages/default.aspx