The mission: Install Sage ACT! 2011 on a Windows 7 machine.
ACT! had evidently been previously installed, and a incomplete uninstall made it impossible to reinstall.
The final solution is here, in this article from the ACT! Knowlegebase: A complete uninstall of ACT! and Microsoft SQL Server using Windows Control Panel -> Programs -> Uninstall a program.
After the complete uninstall of ACT! and Microsoft SQL Server, I was able to easily install from the ACT! installation CD. The installation will include reinstallation of Microsoft SQL Server, and be aware that it takes SEVERAL minutes to complete.
This is MUCH easier and safer than a manual uninstall as described here.