I am having this same problem. I tried installing in the normal way, double clicking the installation file. Unfortunately, there is no option to select where you want to install, so it ended up on my C drive (where my old install of windows XP is). However, the operating system I am using is Vista, and it is on my E: drive.
So, i looked into some other methods. I tried putting the install file right on my e: drive root, and creating a batch file, then selecting run as administrator on the batch file. Still, no luck, same error.
I tried the method you have described above as well, did not seem to work. I ran the following from a command prompt with administrative privledges: E:\>msiexec /i ASPAJAXExtSetup.msi [/q] [/log log.txt] [INSTALLPATH=E:\]
when i run this, all i get is a dialog box describing windows installer:

no log file is created. I've tried running various other versions of this command.. they all produce the same dialog box that i can see. Only when i run just : msiexec /i ASPAJAXExtSetup.msi does anything happen. and what happens is, the installer goes along and fails at the end with the same error as before! Microsoft ASP.NET 2.0 AJAX Extensions 1.0 Setup Wizard ended prematurely
you mentioned to check the "event log" for an error, which log do you mean? application/security/setup/system ? could be any one of those.. i took a look didn't see anything too suspicious, in any of them, in fact no errors at all for today (i filtered for errors only, if it's a warning or informational alert, let me know, i will dig through those too)
I am still unable to install this, and very confused, can anyone help me out?