Finally!, finally got it working lol, been at it all night
OK, the problem lies in the steamtmp file not being able to be written to, and this can't happen because, wait for it lol, the steam folder is READ ONLY!!
Yup, even though I'm an Administrator, it only allows me to read and NOT write to any file in this folder. You can see this if you right click and choose 'properties', then 'security' tab, then select your user name. Clicking the administrator details shows 'full access' (read & write), but for some reason, although I am administrator, the steam installation is taking the 'user' permissions into consideration when the installation is executed. Dunno if thats a bug with Windows 7 or Steam???
Anyway, long and short of it is, to run the installer msi, do it with 'Run As Administrator' anyway, and let the install finish. DO NOT CLICK ON OK to finish the installation and update <---- IMPORTANT!!
Leave that as is for now, we will come back to that later.
Go to your steam directory where installed and 'right click' on steam folder, select 'properties', and on 'general' tab, untick READ ONLY, it will give you an option to include all folders or only files inside folder, choose just the files.
Now you will instantly start seeing files appear within this folder, as if they were hidden, perhaps they were? (I did wonder why the steam folder was so small after installation).
Now that folder is writable, go back to where we last left installer, and now click on OK. Update will complete, and steam will launch asking for username, pass etc.
Kinda long winded lol!, but I got there in the end, seems to be working fine for the moment.