I thought I should post a quick reply about this, an issue I've had since I started using 2 x Nvidia 590's a couple of years ago.
For some reason the installing Physx_*.*.*_systemsoftware.msi package looks for the previous version during installation. This error occurs when it fails to find it. Normally I think this happens because of my regular habit of file cleaning, having only SSD's means I've learnt to keep file bloating to a minimun.
I circumvent this issue by copying one of the previous installers (C:\NVIDIA\DisplayDriver\[version number]) into (C:\Windows\Installer)
(Most recently I had issue with when installing PhysX_9.13.0604_SystemSoftware.msi from Nvidia v326.41 package.)
The steps I followed are this (I run Win7 x64, adjust to your according to the o/s version);
1. I used a search engine (Agent Ransack 2010 Release Build 762 - 2010.03.29.47911) to locate any PhysX* copies on my system.
2. I copied "PhysX_9.12.1031_SystemSoftware.msi" from "C:\NVIDIA\DisplayDriver\320.18\Win8_WinVista_Win7_64\English\PhysX"
3. I pasted "PhysX_9.12.1031_SystemSoftware.msi" to "C:\Windows\Installer"
4. I then manually launched "PhysX_9.13.0604_SystemSoftware.msi" from "C:\NVIDIA\DisplayDriver\326.41\PhysX"
5. installing should proceed and complete successfully.
*** A copy of the "PhysX*.msi" must be in "C:\Windows\Installer" for installation to complete***
Once in the past I simply used a copy of the PhysX*.msi I was installing as I had deleted previous Nvidia temp folders. I've never really bother to check if the installer simply confirms a backup copy is available in case roll back is required or whether its after something specifically from the old installer.
If you don't have any old copies and (downloading an old version is difficult) installation fails if you simply copy the installing PhysX*.msi to "C:\Windows\Installer", you can try using device manager to get the old version and rename it accordingly. if that fails, you will have to download an old version.
Hope this helps some of you.
Edit: You will note my new status
I regularly read these forums but don't normally have much to contribute, hence I registered thinking I may help some frustrated souls out there.