Environment Variable PATH exceeding recommended length

The Momentus XT is an "Advanced Format Drive" and I see that you are running Windows 7 SP1. If the drive runs 512e mode this can cause you a problem with SQL Server. This is because it can create sectors in some multiple of 512 byte boundaries, instead of always at 4096 bytes. (Your error was caused by a 6 * 512 byte sector.)

If that is the case, then you will need to take some corrective action. Microsoft has a blog post and a KB article for Windows 7 and Windows 2009 R2 on this issue which points on to other links.

http://blogs.technet.com/b/filecab/archive/2011/04/26/using-4k-sector-and-advanced-format-drives-in-windows-hotfix-and-support-info-for-windows-server-2008-r2-and-windows-7.aspx

http://support.microsoft.com/kb/982018

If this is your problem you may want to download the latest FSUTIL to investigate. http://www.microsoft.com/en-us/download/details.aspx?id=8903

This has not been the fix for everybody. In the MSDN forums I found a lengthy set of responses with various fixes. http://social.msdn.microsoft.com/Forums/sqlserver/en-US/5c090e72-e83d-4fca-a087-75a3df5d2b4f/localdb-cannot-start-strange-error-in-log-contains-sector-size-4096-and-is-now-on-a-volume-with

From this discussion you will see that some finally resolved their problems by updating drivers.

I was having this issue on Windows 7 64-bit and the following solution is what worked for me (via http://igordcard.blogspot.com/2012/03/unable-to-write-inside-temp-environment.html):

Why
To understand why this error was happening, I went to my TEMP folder and read the log from the PostgreSQL installer: C:\Users\myuser\AppData\Local\Temp\bitrock_installer.log

Which mentioned an interesting detail:
Input Error: There is no script engine for file extension ".vbs".

So, I picked up another file from the TEMP folder, the actual script used by the installer:
C:\Users\myuser\AppData\Local\Temp\prerun_checks.vbs

And tried to run it through the console using cscript:
Input Error: There is no script engine for file extension ".vbs".

I researched a bit more and discovered that the type of file associated with the vbs extension had been changed. In my case, by Notepad++. After I installed Notepad++, I associated some file extensions with it (including vbs), thus causing problems when detecting the type of the script (which shouldn't happen).

Solution
Run regedit, navigate to HKEY_CLASSES_ROOT\.vbs and change the (Default) key back to the string VBSFile. In my case it had been previously altered to Notepad++_file.