I have found that if "c:Windows\temp" does not exist, then the vs2008 cassini redistributable won't install.
It seems to ignore the TEMP environment variable.
If TEMP does not exist, you get the error and event log message:
Service cannot be started. System.IO.DirectoryNotFoundException: Could not find a part of the path 'C:\WINDOWS\TEMP\haab62bw.tmp'.
at System.IO.__Error.WinIOError(Int32 errorCode, String maybeFullPath)
at System.IO.FileStream.Init(String path, FileMode mode, FileAccess access, Int32 rights, Boolean useRights, FileShare share, Int32 bufferSize, FileOptions options, SECURITY_ATTRIBUTES secAttrs, String msgPath, Boolean bFromProxy)
at System.IO.FileStream..ctor(String path, FileMode mode, FileAccess access)
at System.CodeDom.Compiler.TempFileCollection.EnsureTempNameCreated()
at System.CodeDom.Compiler.TempFileCollection.AddExtension(String fileExtension, Boolean keepFile)
at System.CodeDom.Compiler.TempFileCollection.AddExtension(String fileExtension)
at Microsoft.CSharp.CSharpCodeGenerator.FromSourceBatch(CompilerParameters options, String[] sources)
at Microsoft.CSharp.CSharpCodeGenerator.System.CodeDom.Compiler.ICodeCompiler.CompileAssemblyFromSourceBatch(CompilerParameters options, String[] sources)...