Updated: Windows Installer 3.1 breaks VS 2003 Deployment projects
I seem to have made a sweeping generalization in my post about Windows Installer 3.1 breaking Visual Studio 2003 deployment projects . The only scenario in which the installation fails under version 3.1 is if you are running it from a subst‘ed drive.
I like to have a logical drive for each of the projects I am working on. That way I can reference my files with a short path like L:\src\. I tend to use the subst command to create these logical drives because, unlike mapped network drives, file I/O avoids hitting the network stack. As a result, I find builds are faster. Another advantage is that when you are deleting a file from a network drive it is permanently deleted - whereas files deleted from a subst‘ed drive go to the recycle bin and you can easily recover them if necessary.
For some reason, Windows Installer 3.1 won’t let me install from my beloved subst drives. 
Can’t wait for WinFS and a time when just won’t need to care about the physical file system.