Same issue here with similar environment (Windows 7 ent 64, VS2010, Expression studio 3, SL4 sdk, WPF toolkit feb, expression extensions/sdk installed)
I'm looking into this for WPF and wont be using expression (will use VS instead).
I'm getting the same error when installing after clicking the first "next" button (i.e. before I get to the choice of what to install).
Incase the number means anything to anyone, my Windows event viewer has the following entry for the time I was attempting the installation:
"Windows Installer installed the product. Product Name: ArcGIS API for Microsoft Silverlight/WPF v2.0. Product Version: 2.0.0. Product Language: 1033. Manufacturer: Environmental Systems Research Institute, Inc.. Installation success or error status: 1603."
Any ideas please?
Chris