I hope installer projects have been improved dramatically in the next version of Visual Studio, because at the moment they are borderline usable. There are quite a few issues and limitations, here are a few of them just so that you don’t get caught up like I did.

1. When using merge modules, make sure that the names of the files are not too long. I am not certain of the exact length, but if they do go over the limit visual studio will crash while building the project. The most annoying bit is that no trace of what went wrong is evident either. There is nothing in the event log and the “report error” dialog does not show up either.
2. As I have mentioned in a previous post of mine it is not possible to run install util on assemblies that are placed in the GAC through the installer project.
3. When unistalling, although the process completes successfully, the files may remain due to an incorrect reference by Microsoft Windows Installer. If the files in question are placed in the GAC, it won’t be possible to delete them as normal either. Currently there is no known cause for this problem as the last one was fixed in MSI 3.0 and it was a registry corruption.  More details on the subject can be found in this post by Alan Shi. If you read through the comments you will come across the only solution that worked for me, "rd /s <Assembly Name>" executed from %WINDIR%\assembly\GAC”.