This is a known issue related to Microsoft SQL Desktop Edition (MSDE) upgrades.
If the Instance name is invalid error message appears during the installation of the MSDE Service Pack 3 (SP3), perform this procedure:
For example, if the files were extracted to c:\temp, the string is c:\temp\sql2ksp3\MSDE\setup.exe /upgradesp sqlrun blanksapwd=1.
For more information, refer to the Instance name is invalid Error (MSDE Only) section of Cisco Unity 3.x and 4.0 Are Vulnerable to W32.Slammer Worm.
There is also a manual uninstallation process for SQL documented in the following Microsoft article (in case part of the uninstallation has failed in some way): How to manually remove SQL Server 2000 default, named, or virtual instance