I've narrowed it down to a Services component. If I don't remove any services components then I can install my touchscreen and Car2PC adapter (for connecting to my car headunit). If I select all non-critical services for removal then I get the problem. Also, if I disable all services (after not removing them) then the drivers still install and work fine.
The hardware install wizards all complain that there was a problem with the INF file but this appears to be a red herring.
I could remove each service until I find the one that causes the problem but thought I'd ask before attempting this laborious task!
I suppose a likely candidate would be "Universal Plug and Play Device Host". So I'll start with that.
BTW this is for my quest to find the minimal CarPC XP install (In case any was wondering!)