windows server 2008 r2 - Group Policy installation failed error %%1274

OK, I have a really tough one I've already spent all morning on.

PC is a Win7 64 with SP1 and all MS Patches
Usual error everyone is familiar with:

The assignment of application Adobe Reader X MUI from policy Software Install failed. The error was : %%1274

Failed to apply changes to software installation settings. The installation of software deployed through Group Policy for this user has been delayed until the next logon because the changes must be applied before the user logon. The error was : %%1274

1. gpupdate /force /boot


2. Done: Always wait for the network at computer startup and logon = Enabled


3. Done: Startup policy processing wait time = 30, 120


4. Done: Updated network card drivers


5. Done: Deleted HKLM/SOFTWARE/Microsoft/Windows/CurrentVersion/Group Policy



6. Done: GPO permissions check: Authenticated Users have Read access


7. Done: Share permissions check: Everyone has Full access


8. Done: Folder permissions check: Authenticated Users have Read and
   Execute permissions


9. Done: File Permissions check: Inherited


10. Done: PSExec -i -s cmd.exe to make sure I have access to the network
    files


11. Done: PSExec -i -s cmd.exe + re-run explorer.exe and manually start
    the MSIs works fine (they install)


12. Done: I've had instances where a network share with a space in it
    
    didn't work, so I've added a Share name without a space but the
    installer still fails on that package (and all the others).

I've seen this happen with some WiFi cards, but this computer is using Ethernet.

Is there a way of seeing the MSIExec logs to see exactly what transpired?

As an aside, while all the old Group Policy settings have applied, some IE10 settings I added recently are also refusing to apply.

Answer

Oh dear. It took me the whole day, but I found this Windows 7 SP1 bug:
http://support.microsoft.com/kb/2459530

DHCP doesn't get an address on first request because the Windows Boot Firewall rejects the DHCP answer before the Windows Firewall has loaded and replaced it, and allows DHCP answers. In the mean time GP fails to process in that gap.

Ended up it is affecting all GP deployment on this domain (small domain).

MS, I want a refund for my time.