It seems a lot of people have been hitting this issue, but the thread which originally discussed it has gotten a little cluttered. I'm creating this sticky post so that the answer is at least more visible :)
Setup has detected that the original source is necessary to continue. Please redownload and execute XNAGS20_Setup.exe
0: You should only be hitting this scenario if you installed the beta OR if you have some Windows games that requires Games for Windows - LIVE, such as Shadowrun, Halo 2 Vista, Gears of War, Viva Pinata for PC, etc. If you do not meet this scenario, include that information in your post as you have exited the only known situations where this should be hit and we need to add the new scenario to the readme file.
1: Do you see a Source Resolution Dialog (text appearing as above) during install or possibly Reinstall? Is it when the status screen text displays "Installing Games for Windows - LIVE Redist"? If not, please start a different thread - your source resolution issue is a different one than the one discussed here.
2: Have you tried uninstalling, either through Control Panel->Add/Remove Programs in XP or Control Panel (non-Classic view) -> Programs: "uninstall a program" in Vista, the entry under "Microsoft Games for Windows - LIVE Redistributable". This means looking under the 'M's in your program list, not the 'G's... easily missed.
3: If you cannot find an entry to uninstall, please post the following information to this thread. If you don't, I will simply ask you to do so :)
-- Run the tool described here with a -v switch instead of -p, then search for 'Games for Windows'. It may take a couple minutes for the tool to finish inventoring your machine so be patient. Do you find an entry? Can you post the entry on this thread?
-- There should be logs found at Program Files\Microsoft XNA\XNA Game Studio\v2.0\Setup\Logs. Look for the one title "XLiveRedist". Find the most recent install entry (logs are concatenated, sorry!) and search for "SOURCEMGMT: Source is invalid due to missing/inaccessible package". If you find it, can you copy/paste in your post the relevant information (e.g. where did it think the package was, etc.)
Emily Yan | XNA Game Studio Developer