Sql server 2008 R2 installation fails with Error: 17204

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Question :

Sql server 2008 R2 installation fails with the below error message in the log message,

This is a part of the sql server log

Starting up database ‘msdb’. Error: 17204, Severity: 16, State: 1.
FCB::Open failed: Could not open file
for file number 1. OS error: 21(failed to retrieve text for this
error. Reason: 1815).

Has anyone come across such an issue. Please help on how to resolve this issue.

EDIT: the sql server error log can be found at http://pastebin.com/TED7vJWX

This is the latest log,
2012-09-20 14:34:29.74 spid6s Starting up database ‘mssqlsystemresource’.

2012-09-20 14:34:29.78 spid6s The resource database build version is 10.50.1600. This is an informational message only. No user action is required.

2012-09-20 14:34:30.51 spid6s Error: 15209, Severity: 16, State: 1.

2012-09-20 14:34:30.51 spid6s An error occurred during encryption.

Same as before.

Answer :

This is a known issue which has several causes:

  1. The first thing to check is your permissions on local machine:
  2. Are You a local Administrator?
  3. Is there a group policy that might prevent you from installing debugging?

If these do not resolve the problem in your case, and you have verified the required permissions, please provide more info:

  1. What parameters do you use during installation (beside the default ones)?
  2. Which Edition of SQL Server are You installing?
  3. Do You use Default instance name?
  4. On which O/S are You installing?

Next steps:
1. open the folder “:Program FilesMicrosoft SQL Server100Setup BootstrapLog
2. Find a file named Detail.txt
3. This file has a complete log, You need to find the FIRST error that occured during installation.
4. Paste it here, only the part with the error.

Added Solution to comments, waiting to hear if the problem is solved

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