Some 5% of you who responded to our Essentials install experience poll (it’s in the right sidebar) reported problems with a “waitforcatalog” error that caused the installation to fail. While not a full fix, there is a workaround:
1) Open Internet Explorer.
2) Click Tools, then click Internet Options.
3) Click the Connections tab, and then click the LAN settings button.
4) Select the check box for Use automatic configuration script.
5) Copy the URL that is shown in the Address box below the check box. Paste it somewhere that you can retrieve it from later (in case you want to restore this setting when you are done installing WIndows Live)
6) Delete the URL currently shown in the Address box, and replace it with a space character
7) Click OK in Local Area Network (LAN) settings dialog.
8) Click the LAN settings button again.
9) Now clear the check box for Use automatic configuration script.
10) Click OK in Local Area Network (LAN) settings dialog.
11) Click OK in the Internet Options dialog.
12) Run the installation of Windows Live Essentials again.
Let us know if this works for you, and join in on the thread in the Windows Live Solution Center forum.