If you are putting FS in a root folder of an hard drive, there might be some permission issues, especially with Windows Vista.
The installer doesn't do anything strange, except that looking at the path found under
HKEY_LOCAL_MACHINE\Software\Microsoft\Microsoft Games\Flight Simulator\9.0
ExePath key
If this is correct, the installer should work, provided you (not really "you", but the installer, of course) have permission rights to this folder. In this case, the root folder might be an exception, since it's an highly out of standard and not recommended way of installing ANY program directly into an HD root. It's perfectly fine to install FS9 into something like G:\FS9, but G:\ it's really not a good idea.
You might try (if in Vista) turning off UAC, running the installer as administrator.
As a workaround, you might try CHANGING the registry key to purposely point of to a folder that exists (just create an empty G:\fs9 ), run the installer, change the registry key back to G:\, then move everything that has been installed into G:\fs9 to G:\