I figured out the problem by turning on verbose logging. During the installation the transform was failing while looking for C:\MSOCache\All Users\{91150000-0011-0000-1000-0000000FF1CE}-C\ShellUI.MST. This directory is for Office32WW.msi. However, the ShellUI.MST was located in the {90150000-0115-0409-1000-0000000FF1CE}-C folder which is where OfficeMUI.msi located. So during the setup I copied the ShellUI.MST to Office32WW folder from the OfficeMUI.