I searched all over the inter-webs and some suggested yanking out the PSModulePath from the EnvironmentVariables, well I tried that and still no luck. In fact, I'd advice against deleting this variable. Rather keep it there, as there are other applications which might be referencing the same variable.
The issue here seems to be that the path to the PowerShell executable that's needed for the AppFabric installation was incorrect.
Enough talking, how do we fix this error?..
Well, as it turns that appending this path to PSModulePath (System Properties -> Environment Variables -> System Variables) entry solves the problem... %SYSTEMROOT%\System32\WindowsPowerShell\v1.0\
All the best.
Update: 28 January 2012
Added a few graphics for simplicity...


