You receive an "error 1603: A fatal error occurred during installation" error message when you try to install a Windows Installer package
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SYMPTOMS
When you try to install a Microsoft Windows Installer package, you may receive the following error message:
Error 1603: A fatal error occurred during installation.
If you click OK in the message box, the installation rolls back.
CAUSE
You may receive this error message if any one of the following conditions is true: • The folder that you are trying to install the Windows Installer package to is encrypted.
• The drive that contains the folder that you are trying to install the Windows Installer package to is accessed as a substitute drive.
• The SYSTEM account does not have Full Control permissions on the folder that you are trying to install the Windows Installer package to. You notice the error message because the Windows Installer service uses the SYSTEM account to install software.

RESOLUTION
To resolve this problem, do any one of the following, depending on the cause of the problem: • Install the package to a folder that is not encrypted.
Use this method if you receive the error message because you try to install the Windows Installer package to a folder that is encrypted.
• Install the package to a drive that is not accessed as a substitute drive.
Use this method if you receive the error message because the drive that contains the folder that you try to install the Windows Installer package to is accessed as a substitute drive.
• Grant Full Control permissions to the SYSTEM account. (for Windows 2000 and Windows XP only)
Use this method if you receive the error message because the SYSTEM account does not have Full Control permissions on the folder that you try to install the Windows Installer package to.

To grant Full Control permissions to the SYSTEM account, follow these steps: 1. On the Windows desktop, double-click My Computer. The My Computer window appears.
2. Right-click the drive that you want to install the Windows Installer package to, and then click Properties.
3. Click the Security tab.
4. On the Security tab, do the following: • If you are using Microsoft Windows 2000, verify that the Name box contains the SYSTEM user account.
• If you are using Microsoft Windows XP, verify that the Group or user names box contains the SYSTEM user account.
If the SYSTEM user account does not appear in the box, follow these steps to add the SYSTEM account to the box: a.  Click Add. The Select Users or Groups dialog box appears.
b.  In the Name field, click SYSTEM, and then click Add.
c.  Click OK.

5. In the Permissions section, click to select the Full Control check box under Allow, and then click Advanced.
6. Do the following: • If you are using Windows XP, in the dialog box that appears, click to select the Replace permission entries on all child objects with entries shown here that apply to child objects check box for the SYSTEM account, and then click OK.  
• If you are not using Windows XP, in the dialog box that appears, click to select the Reset permissions on all child objects and enable propagation of inheritable permissions check box for the SYSTEM account, and then click OK.
Note If you receive a security message, click Yes.
7. Wait for the operating system to apply the permissions that you have selected to all child folders.
8. Run the Windows Installer package.


STATUS
This behavior is by design.
REFERENCES
For more information, visit the following Microsoft Developer Network (MSDN) Web sites:
Error codes
http://msdn.microsoft.com/library/en-us/msi/setup/error_codes.asp (http://msdn.microsoft.com/librar ... up/error_codes.asp)

Windows Installer
http://msdn.microsoft.com/librar ... ller_start_page.asp