Finally, Success! In case it helps others...
The 166MB package initially did not work for me. I continued to receive the most generic error message stating that installation could not continue, something to the effect of "you need to install a Windows update." I tried running Windows Update and it, of course, would not work. It continually told me that I did not have Administrative rights on my own laptop. YES, I DO!
Since MS support apparently won't tell you this, go to this link: http://support.microsoft.com/default.aspx?scid=kb;EN-US;316524 if you're having this specific Windows Update issue. For me personally, it was of course the 6th, and final, of the possible solutions listed on that support link that actually resolved the Windows Update issue. Be sure to boot in safe mode in order to rename that folder, and don't forget to display hidden files and folders. With that resolved I was able to check for updates. Lo and behold, installing a single update enabled the Zune software package to install.
And what is this magic update that Microsoft couldn't just state up front was so necessary? Windows Genuine Advantage! Apparently the advantage is that I can now continue using the device I paid $250 for on the laptop I paid $1,000 for. Thanks Microsoft! FYI, I'm running a legitimate copy of Windows XP (came pre-installed on my laptop), and if Windows Genuine Advantage is so damn important to you people then say so in one of the error messages that I encountered during the last (wasted) 6.5 hours! Seriously, why didn't the Zune software installer tell me, "You need to run Windows Genuine Advantage to continue"?
And while I'm still fired up about this (useless flaming alert)....
Finally, to Microsoft, why do you force us to use your clunky, annoying Zune software anyway? I hate to say it, but other than the limited wireless sync capabilities, the new software version is worse than the old one. After a one time driver install, the Zune should show up in Windows Explorer, or My Computer, as an external storage device. Period. Kowtowing to the media companies and trying to eke out more profit by forcing people to use your download portal has killed the user experience with your product. Wireless or not, let us drag and drop MP3's to the Zune like a hard drive and your hardware sales would annihalte the IPod within a year or 2. There goes Apple's cash cow. Few people would continue using ITunes at that point. Is that not the endgame? Seriously, are you intentionally trying to turn Apple into a viable competitor again to keep the antitrust dogs at bay? If so keep doing what you're doing. You've engineered an 800 HP car, and you've put a 55 MPH governor on it. The baby steps toward unleashing the potential of this device are way past tiresome.
What a shame.