I am also quite frustrated by the effects of this "fix".
I am running Windows 7 Ultimate SP1 and started getting the "key not valid for use in specific state" during any installation of a program using the Windows Installer service to install.
I eventually found the information that this behavior was created by the KB2918614 patch, so I removed it.
Now, when I try and install software that uses the Windows Installer service, the installation starts; asks for permission to install; then seems to hang for a couple of minutes. It then comes up with the error stating the installer stopped prematurely. Following that, it opens a window that says "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. Contact your support personnel for assistance."
I have tried starting the Windows Installer service and it DOES start correctly (or at least it says it has), but that does not make any difference to the installation sequence. After the installation has failed with the error message shown above, a check of the Windows Installer service shows that it is no longer running.
I have tried running "sfc /scannow" and it completes with the message that "Windows Resource Protection found corrupt files but was unable to fix some of them."
It also says that "Details are included in the CBS.Log windir\Logs\CBS\log. For example C:\Windows\Logs\CBS\CBS.log"
I found this file, but when I try and access it, I get an "Access is denied" message. (And, YES, I am an administrative user.)
So, as it stands right now, this "fix" from Microsoft has done far more damage than good. Especially as I can no longer install programs that I require and which install on a laptop machine, also running Win 7 Ultimate, with no problems. Of course, the KB2918614 patch was never installed on the laptop!!
ANY solution would be of help here. I thought about re-installing the Windows Installer service, but it appears that the version included with Windows 7 is not available as a separate install program, unlike all of the previous versions!!