Followed instructions to the letter, except that I don't have a 3rd party firewall program.
Deleted Program Files/Windows Live.
No Windows Live in Common Files.
No Windows Live in Program Files x86.
Already had automatic updates active.
Reset everything in IE as instructed.
Downloaded Essentials 2012 and got successful installation,
Photo Gallery initial window appears with an immediate Error box saying again:
Photo Gallery encountered an error and can't start. Error Code: 0x80004001
The date on the Photo Gallery folder is 10/31/2009 11:26 PM
It contains an en-US folder which is empty.
Also after installing Essentials there is no Windows Live folder in Program Files.