I found a workaround. I got a newly installed OS with full network support up and running in Virtual PC 2007 SP1 now.
Quote that I put on a blog:
I had the same problems but I have my UAC disabled so I can not solve it by running it as an administrator, as I am the administrator (vista 64bit).
I did/do however get the 1603 error all the time trying to install.
By reading throught the log (which is dumped into your default TEMP folder. you can find it by checking your enviroment variables i CMD typing SET TEMP) seeing most or all of the stuff got installed, THEN ROLLED BACK, I "solved" it by disabling Windows Installers rollback rights. Meaning all the stuff gets installed, the installer fails to rollback. And I can run virtual PC finally
1. run: mmc-> add Group Policies. Local Computer Policy\Computer Configuration\Administrative Templates\Windows Components\Windows Installer\Prohibit rollback -> ENABLED.
2. Install
3. Turn off the policy again (no reboots are required. windows installer sees the policy right away)