7. Click Ok to Start installing the feature. Done!

MCDiag - A powerful Microsoft tool for examining everything to do with your Media Center setup
http://thegreenbutton.com/forums/t/69863.aspx
Have you tried running System Restore out of the Windows environment (or from Safe Mode)? If you have an install DVD that you can boot to (or a Startup Repair option via the F8 Safe Mode screen), try launching the Command Prompt from the options provided when you go down the Startup Repair path.
Using System Restore from the Vista Windows Recovery Environment
http://www.bleepingcomputer.com/tutorials/tutorial142.html
Try running ChkDsk to check your drive for errors. Right-click your Drive icon/ Properties/ Tools/ Error Checking. Try it first by not checking either box (this will run it in a Read-only mode) to see if it flags any hard drive or file problems. If it does, restart it by ticking both boxes, and rerun it to allow it to attempt to fix any found problems.
Reinstall Windows Media Center Vista
Have you checked out Media Center from another user, even if you have to create a new user to test with?
With the two mentioned faults on your machine you might be heading toward a reinstall of Vista in the near future in any case, so make sure your valuable data is safe and backed up.
What Recovery options does your machine come with? Most OEM's just give you an option to restore factory defaults, whereas a Retail DVD allows a proper repair option.