Here is your fix.
http://www.crymod.com/thread.php?threadid=15318
Punkbuster ( I removed this).
" We have seen some people are reporting issues on installing patch 1.1/1.2 and while playing Crysis v1.1/1.2. Following are a few early workarounds for you to look at. This list is Work In Progress and will get updated constantly.
Before following one of the workarounds further below please be sure to backup all your modified files and levels!
CRYSIS - PATCH INSTALLATION ISSUES (DVD & EA Download Manager)
1. Error 1334
Don’t uncheck Punkbuster installation – it is required for the patch.
Manually revert back to original files:
..\Crysis\Game\Localized: different language .pak file (use the standard langauge .pak you have when installing the game)
..\Crysis\Game\Localized\Video: put back all videos/trailers that have been removed before
..\Crysis\Game\Config\: modified .cfg files (use the standard .cfg files delivered with Crysis)
..\Crysis\Game\Config\CVarGroups: modified .cfg files (use the standard .cfg files delivered with Crysis)
..\Crysis\Game\: modified .pak files (use the standard .pak files delivered with Crysis)
Repair Crysis installation (be sure to backup modified files before!)
2. "Insert Disk: Crysis DVD" error
Turn off virtual tools such as Daemon Tools
Repair Crysis installation
Re-Install Crysis
3. “Patch package could not be opened” error
Verify you have downloaded an official/non corrupt version of the Patch 1.1/1.2
Right click on Patch .exe file and execute as Administrator
4. “Upgrade cannot be installed” error
Verify you have downloaded an official/non corrupt version of the Patch 1.1 or Patch 1.2.
Be sure to have Crysis properly installed with administrator rights.
Right click on Patch .exe file and execute as Administrator.
5. “File *** could not be found”
No workaround available at the moment.
6. "Application has failed to start because its side-by-side configuration is incorrect." (kindly found by MintSauce)
Go to Microsoft Support and download the Windows Installer Cleanup Utility.
Install the utility
Run it via the Start menu, should list itself as above.
A list of installed programs should appear. Search out the C++ redistributable entry, and click on the button to uninstall it.
After a successful uninstall, open up the Crysis DVD under the VS Redist folder and extract vcredist_x86.exe to the desktop. An aptly named folder should be there.
Right click the .msi file and install.
This should finally install properly and you're ready to run Crysis.
Some possibly important settings:
From previous attempts to get Crysis running, following changes to the Crysis shortcut should be applied:
1) Compatibility is set to Win XP
2) User level is set to administrator.
AVG might also be responsible for problems during installing and running Crysis. AVG's Resident Shield Protection should probably be off prior to the install.
CRYSIS EDITOR - ISSUES
If there are any new crashes or other weird problems occurring please post them here.
CRYSIS - GENERAL ISSUES
1. Singleplayer save games broken
Be sure to not use a Crysis crack since this is definitely not support and causes issues with your save games.
Please post your dxdiag and game.log (with log_verbosity 8) in this thread.
2. 64-bit Crysis.exe & Editor.exe cannot be execute anymore
Try to uninstall NVidia’s Network Access Manager. "