That's a neat idea, Thraka. However, for the auto-update to work as you describe, every mod would need to have it's own publicly-accessible web server so the program could compare the currently-installed version with the newest available version. Seeing how most mods are hosted on Filefront/Mediafire, though, it doesn't seem many mods have their own dedicated web servers. (If anyone can think of a way around that requirement, please do advise!)
I can see the use of performing an actual registered-installation so that a user could easily uninstall the mods. But I'm not sure about that auto-update. Incorporating seperate methods of installing vs. patching would certainly be a help, though! Also, how about a final option that asks whether to activate the mod and/or start the appropriate version of SoaSE? (Just to be safe, it may be better to activate it *instead* of any already-activated mods, rather than activating it alongside.)
About WPF: I thought that was a rather recent Windows technology. Will your installer still work on WinXP?
And one small thing... the part of the installer's window just below the title bar doesn't respect Windows colors. For example, I've got Windows set to white-text on black-windows, and this is how the installer looks to me:

I didn't realize this at first, but evidently there's supposed to be some text in that white area too, which isn't showing because my text color is set to white.