SQL Server 2005 setup failing with 29538 error

There are numerous occasions when we find that the SQL Server 2005 setup has failed due to the following error:
Product : Database Services (MSSQLSERVER)
Product Version (Previous): 3042
Product Version (Final) :
Status : Failure
Log File : C:\Program Files\Microsoft SQL Server\90\Setup Bootstrap\LOG\Hotfix\SQL9_Hotfix_KB955706_sqlrun_sql.msp.log
Error Number : 29538
Error Description : MSP Error: 29538 SQL Server Setup did not have the administrator permissions required to rename a file: C:\Program Files\Microsoft SQL Server\MSSQL.1\MSSQL\DATA\mssqlsystemresource1.ldf. To continue, verify that the file exists, and either grant administrator permissions to the account currently running Setup or log in with an administrator account. Then run SQL Server Setup again.
This can happen when we are trying to install SQL Server Service Packs, Hotfixes, Cumulative Updates or GDRs. Now what you need to do is find if any of the following are true:
1. The SQL Server service account doesn’t have sufficient privileges on the DATA folder of SQL Server
2. It is a recommendation that the MSSQLSYSTEMRESOURCE files (MDF and LDF) be in the same location as the master database. This issue is documented under KB947989.
3. Another point that you would want to check is if you have any services to re-start the SQL service if it is stopped. SQL Server Setup performs setup in two phases: the first phase being replacement of binaries and the second phase being running the configuration scripts for updating the metadata. During the first phase, the SQL Server service is stopped. In case, you have a service which restarts the SQL service at that point, then you would run into this issue.
The easiest way to verify this would be to check the status of the SQL service from the Services snap-in right after the failure and it should show up as started. Or if you are command prompt savvy Smile, then you could use "sc query mssqlserver" (provided it’s a default instance) to check the state. If it’s a named instance, then the service name would change from mssqlserver to mssql$<instance name>
Sample output:
SERVICE_NAME: mssqlserver
        TYPE               : 10  WIN32_OWN_PROCESS
        STATE              : 4  RUNNING
                                (STOPPABLE, PAUSABLE, ACCEPTS_SHUTDOWN)
        WIN32_EXIT_CODE    : 0  (0x0)
        SERVICE_EXIT_CODE  : 0  (0x0)
        CHECKPOINT         : 0x0
        WAIT_HINT          : 0x0
Two of the known service restart rules applied by other non-Microsoft services are:
1. Cisco security agent has a Service Restart rule which causes the SQL server service to restart once it is stopped.
2. Altiris has a similar rule.
The job of these services is to start services that were stopped. So when SQL setup stopped SQL Server service these services started SQL service which ended up holding a handle on this mssqlsystemresource1.ldf.