Solved this one thanks to an entry at sevenforums.com.
If you're getting this error, there's a good chance you've moved your ProgramData or Program Files directory to a different partition because you have an SSD boot drive. Foe at sevenforums says he moved Program Files; I just moved ProgramData.
Ignore the Windows solutions, and move the $$PendingFiles directory to the partition that contains ProgramData.
Use the Advanced option of the Security tab of File Properties to take ownership of $$PendingFiles and each of the files in it, change permissions for Administrators to Full Control, and delete them.
Rename or delete $$PendingFiles, create a new $$PendingFiles on the partition that has ProgramData, and (assuming the new partition is d:) do
mklink -j c:\$$PendingFiles d:\$$pendingFiles
Problem solved!
