It Looks like you have got round this problem but for reference this error cropped up on an xp hotfix update I created today with the last 3 updates/hotfixes before you install MP11 and IE7.
These were:
1) KB885836 - Wordpad hotfix
2) KB936782 - MP (NOT 11) swf hotfix
3) KB939653 - IE6/7 hotfix ref:
http://support.microsoft.com/kb/939653 and
http://support.microsoft.com/kb/897225/link 2 is an interesting one as it goes on to explain hotfix install order and so forth.
It looks like KB939653 is the cause of the error as I have a slipstreamed disk with sp2 and all updates up untill these three were Slipped (but without IE7 and MP11 slipped) and it was flawless.
Looks like I`ve just solved my S/S error! YAY
maybe this helps
regards