I am still using Visual Studio 2010 for this very reason. The short coming I found in the InstallShield LE at 2012 is that it doesn't let me invoke a call to EsriRegAsm to register my classes.
We have been using WiX for years now in the Extended Support & Maintenance team here at Schneider Electric. We utilize WiX for some of our largest client's custom components and have found it to be robust in all the ways needed despite a somewhat steep learning curve. I highly recommend WiX, as there are numerous help sources online, a widespread and dedicated community, and you can't beat the price.
I am using ESRI AddIns; basically I usually have at least 2 projects, one is called ArcMap and the other is ArcFM.
The ArcMap one is an AddIn, and have one extension which I use to expose properties or settings through reflection, and have all the buttons and stuff which is way easier to create/handle using the new AddIn model.
The ArcFM is the good old com dll with all the ArcFM stuff, AUs, custom editors, and so on.
The ArcFM project compiles into the ArcMap project in a folder I call ArcFM.
When the extension in the ArcMap project starts for the first time, it "extracts" all the ArcFM files into a well known folder (usually i use C:\program files (x86)\fullnameoftheproject) and then it launches the Regex to register all the components.
On the next starts, the extension checks if the version of the ArcFM dll is newer than the installed version and, in this case, it de-register the older one, copy the new one and register it.
For the purpose of first installing or updating the ArcFM components, ArcMap must be launched as administrator, to have full access to the registry and folders.
I am using this model with several customers so far, and I find it good, installing AddIns is quicker because you can just point all the ArcMap to a network folder and drop the new AddIn into one single place.
The users get notified if the ArcFM dll needs to be updated with administrative privileges, so the need to relaunch ArcMap as administrator only when you update the ArcFM part of the project, while giving you instalt updates for the AddIn components if you just need to fix or add a new button.
I can give you further details if needed, just let me know.
Thanks everyone. We are going with WiX and it's working great.