I recently ran the SP2 upgrade on my Exchange 2007.  I downloaded the file and unzipped it to the desktop.  The install ran fine until it reached the Client Access Role and then it failed with an error that mentions “Network Path Was Not Found.”

The Solution:

I unzipped the downloaded file again to the root of the C drive.  I re-ran the install and this time it worked.  It seems that the folder path is too deep when the setup is run from the desktop.