I've had this problem when installing several different programs (iTunes, Adobe Acrobat Reader just to name two). Regardless of what the program is, the install usually gets at least 90% through the process and then just hangs.

I don't see anything bad in the event log besides the following (and this didn't occur exactly at the time of install):

wuaueng.dll (964) SUS20ClientDataStore: A request to write to the file "C:\Windows\SoftwareDistribution\DataStore\DataStore.edb" at offset 16252928 (0x0000000000f80000) for 32768 (0x00008000) bytes succeeded, but took an abnormally long time (185 seconds) to be serviced by the OS. This problem is likely due to faulty hardware. Please contact your hardware vendor for further assistance diagnosing the problem.

I've run check disk and it passed. I've had some problems with BIOS settings in the past with Windows 7, but I'm not sure whether that could be related.

Update... I also see this error in the event log:

Volume Shadow Copy Service error: Unexpected error querying for the IVssWriterCallback interface. hr = 0x80070005, Access is denied. . This is often caused by incorrect security settings in either the writer or requestor process.

Operation: Gathering Writer Data

Context: Writer Class Id: {e8132975-6f93-4464-a53e-1050253ae220} Writer Name: System Writer Writer Instance ID: {33493f01-ac1b-4efb-a378-3053ab03100d}

One last wrinkle.... I see "Previous versions" of c:\ which look like they correspond to the time of attempted installation.