The previous installation path could not be found in the registry

I recently upgraded (or tried to upgrade) an Exchange 2010 SP1 + Rollup 6 server to SP2 + Rollup 1 in our test lab.  (I had copied the Rollup 1 installation to the Updates folder within the SP2 installation point so that it would be installed along with SP2.    With the upgrade to SP2+RU1 halfway completed, the upgrade failed with the following error:

“The previous installation path could not be found in the registry.  Only disaster recovery mode is available.”
“The previously installed version could not be determined from the registry. Only disaster recovery mode is available.”

The server was pretty much unrecoverable.  Exchange 2010 services still existed in Server Manager, but were all Disabled.  Re-running the installation, even from the command line (setup.com /mode:RecoverServer), did not work.  Removing the afflicted server from Exchange groups using ADUC and deleting the Exchange server itself from AD using ADSIEDIT.msc did not help.  NB: If I had not tinkered in ADUC and ADSIEDIT, I could have wiped the server, reinstalled the OS, and run setup.com /mode:RecoverServer, and that should have restored the server to its original state, as the server’s details are stored in AD.

Here is Microsoft’s explanation from http://technet.microsoft.com/en-us/library/ff637981.aspx:
“The Updates folder isn’t supported for use during a service pack installation. Therefore, you can’t include (that is, slipstream) an update rollup along with the installation of a service pack. The slipstream installation of an update rollup during a service pack installing hasn’t been tested. Therefore, you may experience unintended results.”

So, this works for new installations, but should not be used for service pack upgrades.  What Microsoft doesn’t mention is whether or not you can copy the Rollup into the Updates folder in a SP2 installation point when you’re installing a new SP2 server from scratch.

Reference: http://support.risualblogs.com/blog/2011/01/24/exchange-2010-sp1-upgrade-failed/