Windows 2003 server crashing in verfier.dll after recent updates

I am having problems with Windows 2003 server after some recent automatic
updates, and the problems are normally resulting in a crash in "verifier.dll".

I noticed that automatic update shows an error when installing "Microsoft
..NET Framework 1.0 Service Pack 3, English Version". When I tried to install
this after downloading, following error is reported:

The windows installer service could not be accessed.
This can occur if you are running windows in safe
mode, or if the windows installer is not correctly
installed.

I looked at properties of "Windows installer service", it is set to manual
and running under local account. I also noticed that the service started and
stopped when i executed NDP1.0sp3-KB867461-X86-Enu.exe (that installs the
above service pack).

Any pointers to resolve the crash ?

I would like to avoiding re-installing complete OS..

thanks,
Anand