I recently worked on an issue sequencing an application with the Softgrid 4.1 SP1 and 4.2 Sequencer. After selecting a location to download the virtual environment (after the install was completed) an error would appear "SystemGuard download failed (error code 53256)".

The sft-seq-log.txt would show the following:
[08/01/2007 16:51:38 VRB VFSX] SxS: Starting SxS public-to-private assembly conversion.
[08/01/2007 16:51:38 ERR VFSX] SxSPrivateAssembly::LoadConfigFile : Load failed.
[08/01/2007 16:51:38 ERR VFSX] SxSPrivateAssembly::LoadConfigFile : Load failed.
[08/01/2007 16:51:40 WRN VFSX] SxSPE::parseUTF : Unsupported UTF format for file Q:\MyApp\MyFile.dll (format # 3).
[08/01/2007 16:51:40 VRB RTSK] Failed to convert public SxS assemblies.
[08/01/2007 16:51:40 ERR RTSK] SystemGuard download failed (error code 53256).
[08/01/2007 16:51:40 ERR RTSK] SystemGuard download failed (error code 53256).

I found that the root cause of this specific problem (unique to the "Unsupported UTF format" error) is that we attempt to read the manifest in MyFile.dll and the manifest in that file is corrupt. A corrupt manifest in a file will only result in this error if the application you are installing contains SxS binaries. 

You can view or edit the manifest of any file with a PE editor.  I was able to workaround the issue by deleting the corrupt manifest from MyFile.dll after the application had installed but before I selected "Stop Monitoring".  Obviously we don't recommend modifying files of applications without contacting the manufacturer of the application for their guidance.