Try this (can't guarantee it will help, but everyone needs to do it anyway)
Under Internet Options in IE, go to the advanced tab. Scroll through until you see "Install on Demand"
Make sure that's
off. It's the easiest loophole for hackers, spyware, viruses, etc.
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This is what Microsoft has to say about your situation:
QUOTE
SYMPTOMS
When you try to install Microsoft Office XP Service Pack 1 (SP-1), you may receive an error message similar to the following:
Microsoft Word cannot open the End User License Agreement. This feature is not installed, would you like to install it?
If you click Yes, you may receive an error message similar to the following:
Cannot find the file Wordret.msi.
CAUSE
This issue may occur if you have a stand-alone installation of Word 2002 that interferes with the installation of the service pack.
RESOLUTION
NOTE: Because there are several versions of Microsoft Windows, the following steps may be different on your computer. If they are, see your product documentation to complete these steps.
To resolve this issue, remove the stand-alone installation of Word, and then repair Office.
Part 1: Remove the Stand-Alone Installation of Word
1. Click Start, and then click Control Panel.
2. In Control Panel, double-click Add or Remove Programs.
3. In the list of installed programs, click Word 2002, and then click Remove.
4. Follow the on-screen instructions to complete the removal process.
Repair Office
1. Turn off any antivirus products that may be running in the background.
2. Press SHIFT, and then insert your Office CD-ROM.
3. Click Start, and then click Control Panel.
4. In Control Panel, double-click Add or Remove Programs.
5. In the list of installed programs, click Office XP, and then click Change.
6. In the Maintenance Mode dialog box, click Repair Office, and then click Next.
7. Follow the on-screen instructions to complete the repair process.
8. Install SP-1.
If you have Install on Demand or automatic updates turned on, Windows will automatically update itself. This could cause a conflict between your OS and MS Office. Follow Microsoft's steps to repair it. Afterwards, make sure automatic updates are turned off.
If that does not work, go to start ---> run ----> sysedit
A window with 4 tabs should show up. Search for WORDRET.MSI in each window. If it is found, go to the beginning of the line a type a semi-colon
f. ex, if the line says
programs wordret.msi
you would change it to
; programs wordret.msi
If that STILL does not fix it