When sequencing an application, libraries/assemblies that are normally registered and stored in the \windows\winsxs folder are instead copied into the package, and are in the same folder as the executable that uses them . For some applications, when doing a package upgrade, this can cause your setup program to fail because it’s trying to update those assemblies at \windows\winsxs but they do not exist at that location in the package. If you receive an error message while doing a package upgrade related to Side by Side (WinSxS) you can first try removing HKLM\Components from the virtual registry and then performing the package upgrade. This has the effect of telling the TrustedInstaller service that the component does not exist in \windows\winsxs and it should attempt to reinstall it. Most of the time that will allow the package upgrade to now succeed.
Jason Hu | Microsoft App-V Software Development Engineer