This is my notes on my recent attempt to install on the software from Adobe Creative Suite 3 and Windows Vista x64 bit.

The Actual Error
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Setup Error: Setup has encountered an error and cannot continue. Contact Adobe Customer Support for assistance. This installation is forbidden by system policy. Contact your system administrator.

snapshot of the error

This error occurs even when you are the Administrator with full right, full capabilities and with UAC disabled. I’ve also tried the Right-Click, Select Run As. Application Event Log revealed the specific error.

Windows Event Log #1007:
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The installation of [path to *.MSI] is not permitted by software restriction policy. The Windows Installer only allows installation of unrestricted items. The authorization level returned by software restriction policy was [some code].

After much research and reading about VISTA and CS3 issues on Adobe support site, other bloggers on the Net. I finally found the one article that helped. Here is the fix that worked …. a snippet from Heath Stewarts Blog…
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A workaround does exist and we’re exploring additional options. Since our patches write to privileged locations, they require administrative privileges. Local administrators can use the following steps on Windows VISTA 64 and newer if you are prompted with error message 1007.

1. Click Start -> Control Panel
2. Open Administrative Tools
3. Open Local Security Settings
4. Click Software Restriction Policies
   1. If no software restrictions are defined, right click the Software Restriction Policies node and select New Software Restriction Policy
5. Double click Enforcement
6. Select “All users except local administrators”
7. Click OK
8. Try the installation file (setup.exe or autoplay.exe again)
9. You may need to reboot (possible).

I hope that helps. Aloha.