Office 2003 Service Pack 3- Not able to install

I am trying to install Office 2003 SP3 on a windows 2003 EE server (used as a terminal server) which already have office 2003 SP2.

I am getting an error that says "Update can not be applied".

Below are the eventviewer entries for Application:

1. _

   Event Type: Warning
   Event Source: MsiInstaller
   Event Category: None
   Event ID: 1015
   Date:  1-2-2010
   Time:  5:51:22
   User:  Domain\domainadmin
   Computer: TER01
   Description:
   Failed to connect to server. Error: 0x800401F0
   

   For more information, see Help and Support Center at http://go.microsoft.com/fwlink/events.asp.

2. _

   Event Type: Information
   Event Source: MsiInstaller
   Event Category: None
   Event ID: 11708
   Date:  1-2-2010
   Time:  5:52:23
   User:  Domain\domainadmin
   Computer: TER01
   Description:
   Product: Microsoft Office Professional Edition 2003 -- Installation failed.
   

   For more information, see Help and Support Center at http://go.microsoft.com/fwlink/events.asp.

   Data:
   0000: 7b 39 30 31 31 30 34 30   {9011040
   0008: 39 2d 36 30 30 30 2d 31   9-6000-1
   0010: 31 44 33 2d 38 43 46 45   1D3-8CFE
   0018: 2d 30 31 35 30 30 34 38   -0150048
   0020: 33 38 33 43 39 7d         383C9}  
   

3. _

   Event Type: Information
   Event Source: McLogEvent
   Event Category: None
   Event ID: 257
   Date:  1-2-2010
   Time:  5:52:23
   User:  NT AUTHORITY\SYSTEM
   Computer: TER01
   Description:
   Would be blocked by access protection rule  (rule is in warn-only mode) (Common         Standard Protection:Prevent common programs from running files from the Temp folder).
   

The error indicates that the app is running from the Temp folder. Is that correct? Is there an AV scanner with a rule that prevents such execution? McLogEvent would point to McAfee