I had recently reported that an old network installation problem, that
had been resolved meanwhile, reappeared:
https://cygwin.com/ml/cygwin-apps/2015-12/msg00012.html
As an additional observation, on the same machine, there is also a
virtual machine running Windows XP. From that, I can use setup.exe and
seamlessly update cygwin which is then also available in the Windows 7
host environment. Running setup.exe from Windows 7 directly still fails
with the described symptoms.
There must be something weird about interpretation of access rights
using the Windows 7 API.
As an idea, perhaps someone familiar with setup.exe could check whether
at any place access is rejected due to interpretation of access rights
without actually trying the access?
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Thomas