Recently, I had resolved the following issue with an installation of AutoCAD Civil 3D 2011 on Windows 7 (32 bit). It would not install the Microsoft C++ 2005 and 2008 libraries. We even tried to install the VCRedist manually by going into the following folder and there was a 1935 error.
The solution was to set the Windows size Registry to unlimited for this component to install.
Value (Hexidecimal): 0xffffff
Value (Decimal): 4294967295
See also this post:
The final tip is to download and install the Civil 2011 Update 1 afterwards. Do not include the update during initial installation in via Configuration Wizard.