Finally got this issue resolved after sending numerous installation logs back to VMware. I ran into registry problems and VMAuthdServices failing to start due to AV software.
In short following http://kb.vmware.com/kb/1031302 (KB1031302) is important along with some comments from howellrj. Here is what I did in detail along with reasons during my various install tests:
http://kb.vmware.com/kb/1031302
1 I was using the only account on the system, which did not have a name like owner, admin, administrator which had administrator privs
2 Wiped %TEMP% each time I performed an install attempt
3 MS KB 942288 not recommended for Win7 so I skipped
4 No previous version of VMware Workstation was installed on the system so I skipped
5 Ran http://support.microsoft.com/kb/2438651/en-us (MS KB2438651) each time I performed an install attempt. It never found anything wrong
6 Was not running WinXP so I skipped
7 Did run msconfig to disable all services and had to follow https://support3.avast.com/index.php?_m=knowledgebase&_a=viewarticle&kbarticleid=1334 (Avast KB1334) to disable Avast's self protection mode. Even with Avast's self protection mode disabled and all shields deactived parts of Avast were still running and preventing. The only way to get past this point was to remove Avast completely.
8 Did run sfc /SCANNOW prior to each install to be safe. No problems were ever found.
So here is what I did to get the software installed successfully:
A Copied to my system
1 AV installer back onto my system
2 FixIt utility from MS KB 2438651
B Disconnected from the network
C Reboot the system with network not connected
D Removed Avast
E Reboot the system with network not connected
1 Clear the contents of TEMP
2 Ran FixIt utility from MS KB 2438651
3 Ran sfc /SCANNOW
F Install VMware Workstation
G Reboot the system
H Verify VMware Workstation starts
I Install Avast
J Shutdown the system
K Attach to the network
L Reboot the system with network connected
M Update Avast
N Reconfigure Avast