This here looks to be the offending line:
MSI (s) (10:B4) [09:16:47:235]: Executing op: AssemblyCopy(SourceName=msxml4.dll,SourceCabKey=msxml4.dll.sxs.2E8D8EBB_CC16_45E1_BBCA_CB1ED881EDB7,DestName=msxml4.dll,Attributes=512,FileSize=1233920,PerTick=65536,,VerifyMedia=1,,,,,ComponentId={303994BA-6487-47AE-AF1D-7AF6088EEBDB},,,,AssemblyMode=0,)
MSI (s) (10:B4) [09:16:47:255]: Assembly Error:The system cannot find the path specified.
MSI (s) (10:B4) [09:16:47:276]: Note: 1: 1935 2: {303994BA-6487-47AE-AF1D-7AF6088EEBDB} 3: 0x80070003 4: IAssemblyCache 5: CreateAssemblyCacheItem 6: Microsoft.MSXML2,publicKeyToken="6bd6b9abf345378f",version="4.20.9818.0",type="win32",processorArchitecture="x86"
MSI (s) (10:B4) [09:16:47:296]: Assembly Error (sxs): Please look into Component Based Servicing Log located at -144120712ndir\logs\cbs\cbs.log to get more diagnostic information.
Do you have any restrictions on sxs assemblies running under WoW64? Does the log file mentioned in the error message provide any useful information?