Wish to share some experience that may be useful to others: I was trying to install SQL Server 2008 R2 Enterprise Edition 180-day Evaluation version on my 64-bit Windows 7 Ultimate Edition desktop. The installer kept failing with an error that just said: "C:\Windows\Installer\898234.msi". After some searching around on these forums and others I got a sense that the setup was expecting this msi file to be present in C:\Windows\Installer directory. Another conclusion was that this msi was something external to the SQL Server setup itself. Then I remembered that some time ago as part of a maintenance activity, a technician had deleted lot of files from several directories on my PC including the Temp directory. I checked the Recycle Bin and luckily all the deleted files were there including the 898234.msi. I restored all the files and confirmed that this msi was restored back to C:\Windows\Installer. The SQL Server Setup ran successfully after that.
Check out the Cause section in this KB: http://support.microsoft.com/kb/969052. So basically some earlier installer put this particular msi in the C:\Windows\Installer folder and the SQL Server setup depended on it being present there.
Lesson learnt: Do not fiddle with the C:\Windows\Installer directory even if it takes up large amount of space. You never know what effects it may have in future.