I finally got the software to install with no errors on my main desktop. (I was using it on my secondary machine that had a fresh install of windows.) Windows XP SP2 386
This is what I did: (file names are shortened, but you get the idea)
1.) Uninstall all versions and servicepacks of .NET Framework
2.) Restart
3.) Download and run .NET removal tool.
4.) Restart
5.) Reinstalled .NET Framework 1.1, 2.0, 3.0 and any other updates
6.) Added the DisableRollback registry hack (search the forums for this here.)
7.) Downloaded the full ZunePackage from microsoft
8.) Restart
9.) Turn Firewall ON
10.) Disable internet connection
11.) Extract the ZunePackage
12.) Run dotnetfix from the extracted Zunepackage
13.) Run wmfdist11...exe from the extracted Zunepackage
14.) Run windowsxp.kb915865...exe from the extracted Zunepackage
15.) Restart
16.) Run Zunex86.exe
FINALLY (it has been since the release of the new software).....it is installed, working and updating correctly.
Thought this might help someone...
**EDITED** Sorry forgot to add the reinstallation of .NET Framework in there. After all that it did work for me, as I said.