DevOps on Windows has for the last few months been running a series on how a developer can create an operations-friendly Windows Service. The series explains how to overcome the most important hurdles from an operations viewpoint: installation of the Windows Service and its start-up phase. The series finishes with a simple framework that tries to overcome those hurdles in a standard way.
The recently released WiX 3.7 includes support for MSBuild, self update and reference counting
Version 4.5 of Windows Installer, which is currently in beta, has added support for multi-package transactions as well as many other features.