We had the same exact issue with two sql 2005 clusters when trying to install SP4. Both errored because it didn't like the service account. The one was due to the service account user looking like this username@domain.local rather than domain\username. The other was due to the service account getting changed via the services window rather than the sql configuration manager. If a sql service user is changed in services, it might not update the user in all of the appropriate places on the server. Hope this helps.