I was upgrading vCenter from 4.0 U2 to 4.1 and installing it on a clean Windows 2008 64-bit server. The vCenter upgrade went OK, but the Update Manager install failed with “Error 25085. Setup failed to register VMware vCenter Update Manager extension to VMware vCenter Server.” I found VMware KB1024795 with a few fixes, but they did not resolve the issue.
I was trying to install Update Manager on the D: drive. I opened a ticket with VMware support and after some troubleshooting, their advice was to rebuild the 2008 server. Before starting over, I did a little more poking around. I discovered that somehow the local admins group had been removed from the D: drive permissions.
I was logged on to the domain with administrative permissions on the server and vCenter installed just fine. I’m not sure why Update Manager threw an error, but granting the local administrators group full control of D: resolved the problem.