Oh no, I've done that before and it totally messed things up. I couldn't install nor uninstall Morrowind. I had to do a system recovery on my laptop. Although I do have the Windows 7 installation program. I guess I could just reinstall windows and wipe everything out. I don't have much on this laptop except TES games, Blender, Gimp and iTunes.
Usually this is caused by latent registry keys... :shrug:
A reformat nor manual deletion really doesn't solve the issue of your InstallShield not running properly, even on older exe builds on a newer OS... I suppose I was just taking the lazy way out, but it did work.
Out of curiosity, do you have an "engine" sub-file in your InstallShield directory? If it's missing you may have to find a reliable IkernalUpdate.exe to replace the missing dll, ini, and exe files. I would post a link but Google keeps leading me to a page that won't load.
[edit] Guess what... I happen to have the exe in my d-load file. If you need it I can email it to you.