Problem in installing a custom application in VISTA using MSI installer

Hello

I have an MSI installer application which installs the setup files which I
need to run a SaaS application. In this setup we are trying to install a
component developed in VC++ 2008. It requires MSVC++ redistributable. So we
have added merge modules also as part of the setup. The setup is packaged
using MS Visual studio 2003 package and deployment tool. This is working
with out any problem in Windows XP. But when we tried to install this in
Windows 7 and Windows Vista we came across the following problems

1. The component (developed in VC++ 2008) mentioned above failed to register
during the setup. We have to install MSVC++ redistributable separately and
run the setup again to register this component.

2. The setup is accepting a target folder path (C:\AppSetup) during the
setup process. But all the files in the setup are installed in the root
drive (C:\)irrespective of the target folder specified. The user accounts
has enough permission to install the setup.

What would be the probable reasons for these problems?

Thanks
Baiju