Choosing which WiX
WiX seems to have a very good balance between "churn" and "release often" (thank you for the replies to my previous post). The releases in Sourceforge are spaced apart a couple of months and activity is brisk but not furious (browsing the changelists doesn't consume an excessive amount of time). It looks like I didn't need to worry that much about churn and I can go for the nice features in 3.0. The latest release at SourceForge is 3.0.02211 and it is also what Dave (the other setup developer in my team) already had downloaded. I browsed through the change lists for check-ins after the latest release and didn't see a "must have". Going with 3.0.02211 and updating when we see a needed fix or feature looks like a reasonable approach.
Thinking about why I was concerned with churn, my favorite Open Source project used to be Debian and I used to run the unstable version. It was a lot of fun to play with and my interest on the issues related to installer packages owes much to them ':) however, it did change very, very often and is not something I'd suggest for production. The stable version was meant for that but then the updates were too slow for my liking. In fairness, I've read that they have improved in the past few years but I haven't used it for a while.
I am now creating a "staging" area, a local folder that mirrors the folder structure as it will be installed on the target machine. It is not strictly necessary but I find it makes it easier to troubleshoot certain problems. We use Binplace for generating symbols, and the "class" in the place file provides a convenient way for specifying the target path under the root of the output folders. If taking advantage of the binplace step sounds too complicated, you may be right, a simple batch file containing a few copy commands could do the job. On a large project however, it is very easy to end up with a long build process. Skipping unnecessary massive file copying does help in making that shorter.