I had the similar problem when upgrading from V7.0.3FP1 to V8.5.3+FP1 on Windows 2003 Server.The installer failed at 1%, with error “JVM not found” & a warning “could not find specified path”.
My resolutions was to move all the subdirectrories (apart from ‘Data’) from the ‘Lotus\Domino’ folder to a safe location, then ran the installer again.
This time the installer succeeded and upgraded to V8.5.3. I then installed FP1 okay.