Recently I came across this issue with KB#836895. It installs perfectly on Windows 2003 machines but refused to install on Windows XP development machines.
Since we are using some custom parameters that needed to be passed to different MCMS posting it was hard to debug since all the development machines where Windows XP.
After contacting Microsoft they acknowledged the problem and now have fixed it so it installs on Windows XP development machines as well. So make sure you download the latest copy from Microsoft site.
http://support.microsoft.com/default.aspx?id=836895