SQL Server 2008 Access Denied

Judging by the screenshot, you downloaded the "Runtime with Management Tools" instead of "Runtime with Advanced Services" which includes Fulltext and Reporting Services. The x64 installer for SQL Server 2008 Express Edition with Advanced Services is here: http://download.microsoft.com/download/e/9/b/e9bcf5d7-2421-464f-94dc-0c694ba1b5a4/SQLEXPRADV_x64_ENU.exe

Here is a solution for this.

This failure often is caused by a system or domain policy removing the SeDebugPrivelege security privilege from the administrator account running setup. Verify that the account running has this privilege.

The AccessChk tool will print all privleges for an account (http://technet.microsoft.com/en-us/sysinternals/bb664922.aspx) by running: accesschk.exe -a \ *

Alternatively, we can check this through your group policy editor as mentioned below:

Open Group Policy... Start | Run | Type: gpedit.msc | OK | Navigate to Computer Configuration\Windows Settings\Security Settings\Local Policies\User Rights Assignment\Debug programs

The account through which we are trying to run the setup should be here ( besides the local admin on that machine). I included that here, restarted the server ( this is mandatory, gpupdate /force will not work) and ran the setup and it was successful this time.

SQL Server 2008 setup needs this privilege to start up the SQL Server process and listen to an event that signals back to setup that SQL Server successfully started.