We have the same problem getting the Embedded agent installed, and the only way I've been able to get around it is to run it from a batch file. I have to change the location of TEMP first, since the default is Z:\Temp. I then copy the agent executable to the Z:\Temp and run it from there. It then extracts to the C:\Temp folder. I need about 120 MB to get it to extract and install.
Batch:
IF NOT EXIST C:\TEMP MD C:\TEMP
SET TMP=C:\TEMP
SET TEMP=C:\TEMP
COPY /Y \\coreserver\ldlogon\agentinstalls\embeddedagent.exe Z:\Temp
Z:\Temp\embeddedagent.exe
EXIT
After a reboot the TMP and TEMP variables will be set back to Z:\TEMP