I have successfully upgraded to AC v4.0.60 on Win xp Service Pack 2 (our main) and other machines of the same and Vista Bus., Vista Home Basic laptops. All are working well since yesterday.
NOTE: If for any reason you have Windows XP Service Pack 3 installed, you won't be able to install SQL Server on it as there is a known MS bug conflicting between MSXML 6 and SQL Server Express 5.
My MAin computer had Service pack 3 and was running into this problem. AC support people did look at it and thought AC v4.0.60 may have fixed it, but IT DID NOT...the issue remains and I have notified it to them. However, by removing Service PAck 3 from Windows get you going with the process, and that is what I did as I really don't know what I am missing without SP3...probably not a whole lot.