svermette2,
I had the same issue twice just upgrading from one version to another and on two different OS/hardware configurations, multiple attempts to upgrade were failing at the end, sometimes with the error you mentioned.
The way I resolved this, was to shutdown kiwi completely, stop the service manually and close out of all kiwi applications (syslog manager/viewer/webaccess/logforwarder) and then I did the install. It worked the first time on both occasions and I was up and running. I did receive the "Service failed to start" during the second instance of this and was unable to start the service, but rebooting resolved that.
I'm not sure what causes this, but I've run into the problem on a Win2k3 server and a Win2k8 server. Now that I think of it, I beleive I also had the same issue when I was getting this configured on an XP box in my office.
Acy