Microsoft:

Installing the Player on Windows XP Media Center Edition

Windows Media Player 11 for Windows XP supports Windows XP Media Center Edition 2005 with KB900325 (Update Rollup 2 for Windows XP Media Center Edition 2005) and KB925766 (the October 2006 Update Rollup); however, it does not support previous releases of Windows XP Media Center Edition.

If you have Windows XP Media Center Edition 2005, but have not installed the Update Rollup 2, in the Microsoft Knowledge Base, see article 900325, "Update Rollup 2 for Windows XP Media Center Edition 2005." You must download and install it before you can install Windows Media Player 11. The October 2006 Update Rollup is installed with Windows Media Player 11 (provided that your computer is connected to the Internet when the Player is first installed). For more information, in the Microsoft Knowledge Base, see article 925766, "October 2006 Update Rollup for Windows XP Media Center Edition 2005."

Windows Media Player 11 for Windows XP cannot be installed on computers running Windows XP Media Center Edition 2002 or Windows XP Media Center Edition 2004.

You won't be able to install WMP11 now if you are running SP3.  Supposedly there is a loophole with MCE2005 and SP3. 

A little history.  I've been an MCE2005 user forever, numerous rebuilds.  Anyways, SP3 came out, and I rebuilt one of my comps.  I got frisky and installed SP3 right away after loading the SP2 MCE2005 discs.  From that point forward, Windows Update was messed up.  The Update Rollup 2 does not show up and WMP11 does not either.  Manually installed RU2, but WMP11 would not install.  I guess there is a bug with Windows Update and SP3 that only affects MCE2005.

I have since rebuilt that machine, going the long Windows update route, avoiding SP3, which included all the updates I am used to, RU2, WMP11, etc.  THEN after all updates were complete and I USED the MC, THEN I installed SP3, no problems.

Actually, you installed SP3 - then manually installed RU2 (a prerequisite for WMP11) and then installed WMP11.

AVOID SP3 in MCE2005 until AFTER applying all Windows updates. (Or until they fix the loophole = never)