Hello Sean,
This is a known (now) bug in IS6.31. I was working with InstallShield and Microsoft support for months on this issue. This bug is caused by the rights issues that have been added to the new OS, namely Win2000 and XP.
IS knows about it and have fixed it in their newer version IS7.0
Now the issue is two folds.
1) when IS copies the files from the cab file to 'temp' dir and then to system32 directory. The files were keeping the access priveledges of Temp directory (not system32). Thus the ocxs and dlls are not accessible by User (unlike Admin). This issue has been resolved in IS7.0
2) When the IS6.31 creates a new destination folder, same rights issues are associated with the new directory. That is user don't have any write acces to it, whereas Admin can do anything. IS7.0 hasn't resolve this issue. The way I overcame this was to manually create a new directory and set the rights in there through a C program.
Hopefully this will help you.
Sincerely
Gatekeeper