On my Sony Vaio laptop running Vista Home Premium, Microsoft Vista Service Pack 1 failed to install repeatedly until I removed McAfee Security Center and its components of firewall and virus protection. Disabling it was not enough. The installation process requires several restarts, which started McAfee again.
McAfee should notify Microsoft of this as a known issue, and McAfee should notify its users running Vista on Sony laptops. This would have saved me many hours trying other recommended solutions that still resulted in failed installations.
It is a known Microsoft issue and is common to many protection software suites, not just McAfee & has been posted widely all over the web for ages now. McAfee can't sense when you are about to install a service pack. It's always a good idea to do some research first.
Always disable your anti-virus and possibly your software firewall too when installing something as major as a service pack. Enable Windows Firewall in the meanwhile.