I realize this is a pretty old thread, but I had the exact same problem and just stumbled on a solution:
The %SystemRoot%\Temp folder on my system was not writable to non-admins. Updating the ACL on this folder to allow full update access to Everyone fixed the problem,
even though the error message clearly indicates the problem with the user-specific Temp folder: C:\DOCUME~1\
user\LOCALS~1\TEMP. (I attribute this to a bug in building the error message itself, i.e., displaying the user's %TEMP% value instead of the actual target pathname).
To reset the permissions, even if you have XP Home:
- open a cmd window from an account with Admin rights
- cd %SystemRoot%
- cacls /e /g Everyone:F