Are you logged in as the local administrator on the system?
If not, then please do so and try again. If you can't log in to the system using a local administrator then hold off the installation until you can.
domain\domainadmin = wrong
localhost\administrator = correct
The error definition is as follows: This problem occurs if the Windows Installer process has insufficient contiguous virtual memory to verify that the .msi package or the .msp package is correctly signed.
Microsoft has released a hotfix to address this issue here: http://www.microsoft.com/en-us/download/details.aspx?id=6724
Can you also confirm that there is enough disk space on C:\ / D:\ ?
Is the system starved of memory?