Actually a user had problem in installing SP2 so it caused error while installing SP1 since some parts of the SP2 got installed and the registry got updated.
Now we successfully installed SP2.
We needed to give sufficient permission to the user installing SP2 for the data folder which contains database file since it creates a new set of resource database files after installing SP2.
Check out:
http://social.msdn.microsoft.com/forums/en-US/sqlsetupandupgrade/thread/ef396e0b-0ebb-4c67-a2ed-eb5b90a8ef27/[/url]