Life is full of surprises. The server disaster of the day was a server that crashed sometime in the night for a customer and came up with a hive corruption error on reboot. All the exe files worked but anything with an msc extension didn't.
After nosing around I did the following: I went into the C drive and pushed out the permissions without making any changes. I figured something caused a permissions change and that would fix it. Then I re registered all of the Volume Shadow Copy service files after stopping vss. Not all of the files regsitered properly but most of them did. MSC files started to work.
After that I was able to start DHCP and some other services that were down including Shadow Copy. Then I re ran Service PAck 2. After rebooting we still had a hive error and IE wouldn't work right. MSTDC also wasn't starting. To fix MSDTC I added a %systemroot%\system32\dtclog folder. It was missing. Then I ran msdtc -resetlog from a command prompt. The MSDTC service then started.
Since the server was running IE 7 I went ahead and copied over the setup files for IE 8 and ran the upgrade. After a reboot everything came back without error.