Did you have the "Show updates" box checked at the top of Add or Remove
Programs?

An alternative you could try would be to locate this folder,

C:\WINDOWS\$NtUninstallKB925877$

It's a hidden folder, so you may have to go to Control Panel -> Folder Options
and make changes on the View page to show hidden files and folders.

Within that folder you should find a folder named spuninst. Open it and double
click on spuninst.exe. This should start the uninstall process for this update.

Good luck

Nepatsfan

I also had the "XP SP3 cannot be installed over RDP 6.0 MUI Pack"
problem on a fully patched MS Windows XP Professional with SP2.

The problem is mentioned on http://support.microsoft.com/kb/949388/
and the page suggests uninstalling KB925877 in Add or Remove Programs.

I found the update in the Add or Remove Programs applet (below
"Windows XP - Software Updates") and removed it. (BTW, finding such an
update in the Add or Remove Programs is a difficult task as you have
to search visually for "KB925877" in the list of hundred of updates as
the applet does not have a search box). Also I restarted Windows XP.
After that the SP3 installation reported the error again.

It seems the KB925877 was not removed successfully because
C:\WINDOWS\$NtUninstallKB925877$
was removed earlier on that Windows.

The problem may be resolved in the following way:
1. In the System Registry remove the following keys:
HKLM\SOFTWARE\Microsoft\Updates\Windows XP\SP3\KB925877
HKLM\SOFTWARE\Microsoft\Windows\CurrentVersion\Uninstall\KB925877
HKLM\SOFTWARE\Microsoft\Windows NT\CurrentVersion\HotFix\KB925877

2. Install the KB925877 - you can get it by visiting
http://support.microsoft.com/kb/925877

3. Uninstall the KB925877 by running
C:\WINDOWS\$NtUninstallKB925877$\spuninst\spuninst.exe

Now you can install Windows XP SP3.

I'm not sure if the step #1 alone would do the trick (I haven't try
that). Maybe you would be able to install SP3 but another problem
would appear later in Windows.

Off topic:

The RDP 6.0 MUI Pack (KB925877) was installed using the MS
Windows Server Update Services (WSUS) ver. 3.0, which says that the
KB925877 update does not support removal, i.e. you cannot select the
"Approved for Removal" option for that update.

-- rpr.