In-Place Upgrade failure from SQL Server 2008 SP1 to SQL Server 2008 R2

Recently I was trying to upgrade SQL Server 2008 to SQL Server 2008 R2. The upgrade failed with error message below.
TITLE: Message Details
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The Instance ID 'MSSQLSERVER' is already in use by SQL Server instance 'MSSQLSERVER.INACTIVE'. To continue, specify a unique Instance ID.
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BUTTONS:
OK
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Brief Background of upgrade process:
Here we have an orphaned SQL instance named MSSQLServer.Inactive. Let’s understand the upgrade process here. During your upgrade, there are two stages:
Pre-PointOfNoReturn
Post- PointOfNoReturn
Point of No Return is a point at which 2008 R2 will take over the instance name and SQL Server 2008 will be then uninstalled.
Resolution:
In this scenario, the setup is failing at Pre-Point Of No Return otherwise we would have tried to repair the SQL Server 2008 R2 instance.
The first thing I tried was renaming the registry key (below) and upgrading it, but it did not help this time (this has helped in some cases)
HKEY_LOCAL_MACHINE\SOFTWARE\Microsoft\Microsoft SQL Server\Instance Names\SQL\Inactive
The second option is to remove the existing instance and reinstall a fresh default instance.
I tried to uninstall the new SQL Server 2008 R2 instance from ADD/REMOVE Programs, but it was not showing the instance name as it was inactive.
Ran below command
setup /action=uninstall /instanceid=MSSQLSERVER /features=SQLEngine,Replication
(You can select more features if it is installed in your environment. Refer Summary.txt for last upgrade failure)
After the uninstall was successfully completed, I was able to install the SQL Server 2008 R2 instance.