I decided to go ahead and update my dev VM, since the next client will have everything updated, I thought it would be important to also have things up to date.
WSS SP 2 installed without a problem, but of course Office Servers Service Pack 2 had issues.
The base install just said, Installation Failed.
Looking at the logs, "The extraction of the files failed" - http://support.microsoft.com/kb/943589
Still not very helpful. MSDN/Technet and MS Support sites mentioned that this is due to hard drive space. In my case I have 16GB free still on my VM drive, but the installation still fails.
Solution? Just extract the files as if you were going to do a slipstream install.
using cmd.exe to run the exe with the switch /extract will cause the exe to extract the files to a location for you. Now you can add these to the folder of you moss install for slipstream install to include SP2, or as in my case, run the sp2 packages as needed. Some of them are not installed depending on your system (i.e. what services you are running). –Update, after I unpacked the files, the install worked.
Hope that helps.