Application Errors Occur After You Run Xmlinst.exe on Production Servers
The MSXML parser is intended for installation in “side-by-side” mode, which allows you to install the specific versions of the MSXML parser that you want without one installation of the MSXML parser affecting another. Thus, all separate versions of the MSXML parser can coexist. In addition, the new and previous DLLs for the parser can reside “side-by-side” on your computer.
An alternate method for the installation of the parser is to as the Replace Mode. In Replace Mode, all the references to any version references of the MSXML parser are updated so that only the latest version of the MSXML parser is used.
Therefore, when you run Xmlinst.exe, Xmlinst.exe may cause programs to fail that were written and tested with specific versions.
Note that if you run Xmlinst.exe, Xmlinst.exe may cause system instability and can cause programs to fail. After you run Xmlinst.exe, the computer is in an unsupported state. Furthermore, the changes made by Xmlinst.exe are global to the computer on which Xmlinst.exe was run, and thus affect all the programs that use the MSXML parser.
Read full story at
http://support.microsoft.com/kb/278636/