You may find with the new secuity trimming in windows 2008 and Vista that MSI no longer work. If you are experencing this issue it has been most likely been caused by the Always Install MSI with Elevated Privileges enabled in Group Policy. Disable this and the msi should work as expected.
Example gpreult /v when this has been disabled
Administrative Templates
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GPO: Local Group Policy
KeyName: SoftwarePoliciesMicrosoftWindowsInstallerAlway
sInstallElevated
Value: 0, 0, 0, 0
State: Enabled
Example gpreult /v when this has been enabled
GPO: Local Group Policy
KeyName: SoftwarePoliciesMicrosoftWindowsInstallerAlway
sInstallElevated
Value: 1, 0, 0, 0
State: Enabled