Well, I finally got it installed. Here is what I did.
1) Manually deleted any X4 folders & registry keys.
2) Restart
3) Uninstalled all MSXML Parser 6 stuff (SPs, SDK).
4) Reinstalled MSXML Parser 6.
5) Copied over Setup folder from insall DVD to a temp folder on my hard drive.
--- at this point I tried running Setup.exe, got same XML error dialogs ---
6) Tried running the Coreldraw X4 SP1 install, it gave the expected error message that the X4 product wasn't installed.
7) Now ran Setup.exe with success! No idea why this sequence worked ...
8) Ran X4 SP! with success ...
9) Program works. Hooray! Thanks for all the replies.