To verify that the system search worked, you might create an MSI log file while deploying your installation: running the command
msiexec /i product.msi /Lp properties.log
should do it. The log file should show all the properties set by your installation, and this will tell you if your system-search property was filled in.
As for the launch condition, you might set the condition to:
Not REGISTRYPROP
(or whatever property name you used in the system search) and then define an exit message if the condition fails (that is, if the registry key exists).