I came across a problem of moving backwards on my version of SharePoint (2010->2007). I uninstalled SharePoint 2010, and then went to install 2007. Everything worked fine until I got to the psconfig.exe step. It would fail immediately with a FileNotFound exception.
Turns out that.NET has some assembly redirection magic happening! You have to run the following commands:
cd c:windowsassemblygac_msil
Edit the config files in the following directories to remove the redirect bindings:
Policy.12.0.Microsoft.SharePoint
Policy.12.0.Microsoft.SharePoint.Portal
Policy.12.0.Microsoft.SharePoint.Publishing
Policy.12.0.Microsoft.SharePoint.Security
Policy.12.0.Microsoft.SharePoint.WorkflowActions
Policy.12.0.Microsoft.SharePoint.Workflows
cd c:windowsassemblyGAC_64
Policy.12.0.Microsoft.SharePoint.Search
Policy.12.0.Microsoft.Office.Server.Search
Policy.12.0.Microsoft.Office.Workflow.Feature
Chris