I'm not a tech guru nor do I claim to know the internals of Windows registry. I'm only stating my experience so that someone else having the same issue might benefit from it.
I was having one hell of a time trying to install EndNote and Matlab
and they both kept trying to install a prerequisite called 'Visual C++ 2005 Redistributable'. Installation would get to a certain point and then it would seem to freeze and then timeout in 4-5 minutes with the following error message:
ERROR:Error 1935.An error occurred during the installation of assembly 'Microsoft.VC80.ATL,type="win32",version="8.0.50727.42",publicKeyToken="1fc8b3b9a1e18e3b",processorA rchitecture="amd64"'. Please refer to Help and Support for more information. HRESULT: 0x800736B3.
[11/15/07,18:09:55] Microsoft Visual Studio 2005 Professional Edition - ENU:  ACTION FAILURE:Action ended
(This is not the exact error, I found a similar one for reference. The exact error had to do with the redistributable not the full version of Visual Studio)
I tried various tricks that have worked before in situations like this (including rebooting several times) but nothing worked. I had given up when I accidentally stumbled upon this one discussion on ESRI support forums where someone had mentioned changing the value of RegistrySizeLimit to ffffffff and rebooting.
I did exactly that and viola. All computers (six new Windows 7 installations) started working again. Windows updates were failing as well before and this fixed that problem too. Visual C++ 2005 redistributable installed just fine and so did 2008 redistributable.
Nothing else was changed in those computers. So draw your own conclusions. I'm just happy it worked and I can finally get paid