It looks like the previous upgrade from 3.12c to 3.2(1) didn't go though as it appeared to. This fix from TAC worked to create a clean upgrade to 3.2(1) then apply SPB:
1) Delete all the files from the folder pointed to by the environment variable
%TEMP%, typically, C:\Documents and Settings\Administrator\Local Settings\Temp
2) Delete the folder C:\Program Files\Common Files\InstallShield\Engine
3) Rerun the install(upgrade).
There have been some problems when customers upgrade CCM. The is a bug that is causing this problem
CSCdu63167
CM install fails due to IntegratedInstall/InstallShield issues
Description: It turns out that when an application is installed to the MCS server that uses a newer version of the InstallShield, some files are put in the C:\Program Files\Common Files\InstallShield engine directory. When the IntegratedInstall setup.exe is executed by the install wrapper, InstallShield sees that a newer version of the program is already installed in that location so it leaves it there. When this happens the upgrade will not complete and IntegratedInstall will not complete. The processes will have to be killed manually.
The workaround are the steps described above