ok... figured out the problem -
1) I found an earlier post that suggested i rename the security database, but just realized that if i do that the REPAIR tool esentutl won't find the file to repair.
2) so make sure the file is there ... and run the following:
- first REPAIR the database
esentutl /r c:\windows\security\database\secedit.sdb
- the RECOVER the database
esentutl /p c:\windows\security\database\secedit.sdb
3) then i was able to complete the installation of IIS