Hi,
The problem is probably that the ALLUSERS property is being set to 1 (machine) even though when you advertised the app, it was set to NULL (user).
Try removing the ISInitAllUsers custom action from your project. Rebuild. Then, test your 3 scenarios.
Only silent installations are affected by the removal of this CA. If you are performing silent installations, keep in mind that the default for all users will now be NULL (user). So, you'll have to specify ALLUSERS=1 on the command line.
Rich