Ok, this is not a SH3 game error. It's a windows problem. Basically you have a partially installed & corrupted installer lodged into Window's memory and it can't execute SH3's installer while it is present.
Here's the easiest way to remove Sh3 fully and remove the corrupt installer.
Delete the SH3 Program Folder from the root directory (usually c: ).
Delete the SH3 folder within My Documents.
Reboot your PC.
Visit
http://www.ccleaner.com/ and download the free software (virus free and very good), then run the cleaner & registry fixer.
Shutdown & Restart your PC.
Reinstall SH3.
- Do not skip any of these above. The reboots are important.
One word of caution. While the registry is only a listing service for windows, you can do permanent damage by messing with it if you don't know exactly what you are looking for. For example there are about 4 entries, in different locations, for SH3 alone. If you should decide to edit your registry manually always create a restore point.