I was installing XP on a virtual machine recently and ran into a problem while installing the Windows Genuine Advantage update. Basically, it starts the update, then tells you WgaNotify setup canceled (sic). See below...

I then searched the google, but (surprisingly) found more help from the Live Search this time. From a site I found there, I got a link to the manual WGA installer.

When Microsoft Update doesn't work, sometimes the manual installer gives you more clues about why it is crashing. However, it just threw the same error with no additional clues (not even in the Event Viewer).

Well, nobody I could find on the google or the live search posted anything else helpful, so it was time to dig into this mystery on my own.

Acting on a gut feeling that it might be permissions related, despite being a fresh install of XP, I fired up SysInternal's ProcMon. I ran the setup again while capturing all activity. I then searched for Access Denied error messages and found this...

That looks promising! I fired up regedit and looked at that registry key. Sure enough, I had no permissions to write to that key...

I added "full control" for local administrators, re-ran the manual WGA installer and it worked! Mystery solved.