When you include the MSXML 4.0 merge module for Windows XP and Later (the one which should be installed in WinSxS), after a major upgrade when you click on the advertised shortcut it enters into auto repair mode.It happens only the first time you run application.
This is related to how CostFinalize determines what needs to be installed during the costing process. For .NET assemblies installed to the GAC and Win32 side-by-side assemblies, MSI does not perform the actual installation of these resources, so it "guesses" at what needs to be done with them when they are already on the machine (see http://support.microsoft.com/kb/905238/en-us for a detailed desciption).
You can try resequencing the RemoveExistingProducts action to later in the sequence (you can do this with the "Install setup then remove unneeded files" option in the Upgrades view Upgrade Windows Installer Setup node).
