It looks like net framework has not registered correctly.
Try this: (You may need your original installation DVD for this)
Open Control pane (icon view)
Select Programs and features
Over on the left select Turn Window features on and off.
Scroll down to Microsoft Net framework 3.5.1 and click the blue square (if it is not blue, but clear, it is not installed anyway!)
Ok it and wait until it is finsished and then reboot.
Now go through the procedure again, but mark the square and OK. After a reboot, if all went well you should find you can now install MS Office