I don't know if this will help in Windows 7... However, I had the same problem with Windows 8.1. No matter what I did, and I tried a lot of things that people suggested to get rid of the 1603 Fatal Error, nothing worked. I kept getting the error. Finally I found a thread in the Microsoft Community Forum. It turns out that one of the Windows updates KB2918614 broke the Windows installer. Once I uninstalled the KB2918614 update, I was able to install Paint.net with no problems at all.
Here's the thread I found with that solution. It says it is for Windows 8.1 Pro, but I don't have the Pro version and it worked for me, so it might work for Windows 7 also. Worth checking. If it doesn't make a difference, you can always reinstall the update.
Can't install problem with .NET Framework
in Troubleshooting & Bug Reports
Posted
I don't know if this will help in Windows 7... However, I had the same problem with Windows 8.1. No matter what I did, and I tried a lot of things that people suggested to get rid of the 1603 Fatal Error, nothing worked. I kept getting the error. Finally I found a thread in the Microsoft Community Forum. It turns out that one of the Windows updates KB2918614 broke the Windows installer. Once I uninstalled the KB2918614 update, I was able to install Paint.net with no problems at all.
Here's the thread I found with that solution. It says it is for Windows 8.1 Pro, but I don't have the Pro version and it worked for me, so it might work for Windows 7 also. Worth checking. If it doesn't make a difference, you can always reinstall the update.
http://answers.microsoft.com/en-us/windows/forum/windows8_1-windows_install/kb2918614-breaks-windows-installer-service/3d75a1c2-114a-4241-a527-35b536edc158