There is already an EE question on this topic but my situation is different. I've also noticed at least five other posts on the web with this problem with no solutions given.
When installing SP2 for SQL Server 2005 I get this error message:
MSI (s) (E0!68) [09:02:25:673]: Product: Microsoft SQL Server 2005 (64-bit) -- Error 29512. SQL Server Setup was unable add user OUR-LAN-DOMAIN\OUR-SERVICE-ACCOUNT to local group OUR-LAN-DOMAIN\SQLServer2005SQLAgentUser$OUR-DATABASE-SERVER-NAME$MSSQLSERVER.
The error message seems to contradict itself: it says "local group" which seems to me to mean the group on the database server itself YET the group name is prefixed with our LAN domain name. So which one is it?
Also, I'm not sure if this message means there is a problem in Active Directory or in the security model of SQL Server itself. I don't think it means SQL Server itself because I don't think SQL Server has groups... it only has Roles, right?
We looked in Active Directory and the user above does indeed exist in the domain-level group mentioned.