Continuing the saga, Micrsosoft sent me a DVD of Vista Business (service pack 1) and instructed me to perform an in-place upgrade to revert the computer to a known quantity prior to installing service pack 2.  No matter what I did, the in-place upgrade wouldn't run. It kept saying there wasn't enough disk space.

Vista Service Pack 2 will not install on my Vaio.  It gets all the way to the end of Stage 3, finds an error, then reverts. I have to say that the reversion seems to work -- but SP2 will not install.  I've been working with Microsoft on this.  So far, we've tried disabling all non-Microsoft apps and services, running the install in safe mode,  and removing all antivirus and security software.

Update1: I'm now waiting for the escalation engineer to finish examining the CBS logs and offer some more suggestions.