Seen this before in some cases, manual install of the basic vse 8.7 (unadulterated with mid changes) package on the machine, may bring up warnings about previous installs just accept all and let it run through, worked in the 10 or so cases I had.
also check for supported OS service pack levels
WinXP SP3, Eng.
well its obv supported then and shouldnt be any msi issues.
how does a manual install of vse react? do you get errors then and can you push through them if you do?