Just a summary, in case anyone has the similar issues in future:

The initial problem was: if you try to create an iis:WebApplication with
isolation="medium" or isolation="high", the installation failed and
rolled back logging the error "0x8004E00F: COM+ was unable to talk to
Distributed Transaction Coordinator (DTC)". 
The attempt to start DTC service manually failed with the same error.
This was fixed by resetting msdtc log:
http://windowsitpro.com/article/articleid/75902/jsi-tip-4593-you-receive
-an-error-when-opening-the-component-services-mmc.html

Next, it became to fail with the error 0x80110414. This was fixed by
synchronizing the ISUR and IWAM users passwords in system security
storage and IIS metabase: http://support.microsoft.com/kb/297989

Hope this saves time to anybody else.

BTW, still wondering, what if this happens at user's side? Seems quite
an advanced case to check everything from MSI... :)

-- Yan

-----Original Message-----
From: Yan Sklyarenko [mailto:y...@sitecore.net] 
Sent: Friday, January 30, 2009 9:38 AM
To: General discussion for Windows Installer XML toolset.
Subject: Re: [WiX-users] Bug in iis:WebApplication?

Sorry for delay with this response, Rob.

I have run a simple test for 3 different builds: 4513, 4805 and 4923. It
works the same way for any.
Actually, the result is the following: the DTC service gets started
automatically once addressed either by IIS extension or by IIS console,
when you try to change the isolation level. So, it must have been
something with that machine, when it failed... 

Anyway, this part doesn't seem to be broken by those recent changes in
IIS extension, which is good news :). Sorry for the false alarm.

-- Yan

-----Original Message-----
From: Rob Mensching [mailto:rob.mensch...@microsoft.com] 
Sent: Wednesday, January 28, 2009 7:08 PM
To: General discussion for Windows Installer XML toolset.
Subject: Re: [WiX-users] Bug in iis:WebApplication?

It does surprise me that IIS console can configure this and the
CustomAction cannot.  I wonder if this is another issue related recent
build changes.  Would you mind trying an older build of WiX (two months
or maybe six months) and see if it works.  If this used to work and
doesn't now then there is definitely a bug to be fixed.

-----Original Message-----
From: Yan Sklyarenko [mailto:y...@sitecore.net] 
Sent: Wednesday, January 28, 2009 01:17
To: General discussion for Windows Installer XML toolset.
Subject: Re: [WiX-users] Bug in iis:WebApplication?

>> What happens if you create a medium isolated AppPool on Windows XP
with DTC disabled?

If you mean doing this manually via IIS console, then it works fine with
DTC disabled. I can easily create applications with Medium and High
isolation level, and DTC stays disabled. If you mean using WiX IIS
extension, then it fails with the error I filed as a bug previously.

>> I think this is less an issue with the extension and more a design
issue with IIS
I'm confident you're right. But I hope you can give me a hint how to
work such IIS issues around. I really don't want to fall back to the
custom actions :) One of my goals when switching the installation to WiX
was to avoid inventing my own custom actions (at least, deferred ones).

Thank you!

-- Yan

-----Original Message-----
From: Rob Mensching [mailto:rob.mensch...@microsoft.com]
Sent: Tuesday, January 27, 2009 6:00 PM
To: General discussion for Windows Installer XML toolset.
Subject: Re: [WiX-users] Bug in iis:WebApplication?

What happens if you create a medium isolated AppPool on Windows XP with
DTC disabled?  Does it have issues as well or does it automatically
enable DTC?  I think this is less an issue with the extension and more a
design issue with IIS.  We try to plaster over a lot of bad designs in
the WiX CustomActions but sometimes things still poke through.

-----Original Message-----
From: Yan Sklyarenko [mailto:y...@sitecore.net]
Sent: Tuesday, January 27, 2009 03:04
To: General discussion for Windows Installer XML toolset.
Subject: Re: [WiX-users] Bug in iis:WebApplication?

I've decided to bring this back to your attention, guys.

I have received the following feedback to the bug I've registered:

"
This error code "0x8004e00f" is CONTEXT_E_TMNOTAVAILABLE, which happens
when COM+ was unable to talk to the Microsoft Distributed Transaction
Coordinator. This service is only required when the application is
installed as a COM+ application as seen in administrative tools ->
component services, which occurs when isolation is set to "medium" or
"high".

Either install with an Isolation value of "low" (the default if no
isolation value is specified), or if you want to install with isolation
values of "medium" or "high", you'll have to enable the Microsoft
Distributed Transaction Coordinator on the machine you're installing to,
then install the MSI.
"

DTC is disabled by default for XP machines, as far as I can see. This
means manual action before running install, which is not good user
experience.

Could you please confirm that the way IISExtension works at the moment
is not a subject to change in the nearest future?


It might happen that I simply chose the incorrect approach.
All I want to accomplish is to take existent 'Default web site', switch
its root to my INSTALLDIR, and tune its properties, for instance, change
the isolation level to Medium.

What's the way you would keep to in order to achieve this? Please,
suggest.

Thanks a lot!

-- Yan


-----Original Message-----
From: Rob Mensching [mailto:rob.mensch...@microsoft.com]
Sent: Tuesday, January 20, 2009 7:36 PM
To: General discussion for Windows Installer XML toolset.
Subject: Re: [WiX-users] Bug in iis:WebApplication?

Thanks, I'll bring this to Mike's attention when we meet on Thursday.

-----Original Message-----
From: Yan Sklyarenko [mailto:y...@sitecore.net]
Sent: Tuesday, January 20, 2009 08:15
To: General discussion for Windows Installer XML toolset.
Subject: Re: [WiX-users] Bug in iis:WebApplication?

Done: #2524017

-- Yan

-----Original Message-----
From: Rob Mensching [mailto:rob.mensch...@microsoft.com]
Sent: Tuesday, January 20, 2009 5:51 PM
To: General discussion for Windows Installer XML toolset.
Subject: Re: [WiX-users] Bug in iis:WebApplication?

Yeah, sounds like a bug.  Mike made some changes recently to handle COM+
configuration that was not getting cleaned up correctly.  It could be
this is a bug introduced by that change.  Please do open a bug on
SourceForge.

-----Original Message-----
From: Yan Sklyarenko [mailto:y...@sitecore.net]
Sent: Tuesday, January 20, 2009 02:51
To: General discussion for Windows Installer XML toolset.
Subject: [WiX-users] Bug in iis:WebApplication?

Hello WiX community,

It seems I have found a bug in IIS extension. I hope I'm wrong and
somebody will point me to my mistake.

First of all, WiX version is 3.0.4917.0. I'm trying to configure the
existent website in IIS 5.1. Here is my component definition:

      <Component DiskId="1" Id="ModifyIISSite5"
Guid="{7041EB6F-2023-4D19-90D2-EE9101C71E44}" Directory="WebsiteFolder"
Permanent="yes">
         <Condition>IISMAJORVERSION = "#5"</Condition>
         <iis:WebSite Id="IISSite5" Description="[IISSITE_NAME]"
Directory="WebsiteFolder" ConfigureIfExists="yes">
            <iis:WebAddress Id="IISSiteAddress5" Port="[IISSITE_PORT]"
/>
            <iis:WebApplication Id="IISSiteApplication5"
Name="[PRODUCT_FAMILY]" Isolation="medium" />
         </iis:WebSite>
      </Component>

When I build and run my MSI, it gives me the following error (snippet
taken from the log file with LOGVERBOSE=1):

...
WriteMetabaseChanges:  Writing Metabase Value Under Key: /LM/W3SVC/1/
ID: 1023
WriteMetabaseChanges:  Writing Metabase Value Under Key: /LM/W3SVC/1/
ID: 2021
WriteMetabaseChanges:  Writing Metabase Value Under Key:
/LM/W3SVC/1/Root ID: 3001
WriteMetabaseChanges:  Writing Metabase Value Under Key: /LM/W3SVC/1/
ID: 1015
WriteMetabaseChanges:  Creating ASP App: /LM/W3SVC/1/Root
WriteMetabaseChanges:  Error 0x8004e00f: failed to create web
application: /LM/W3SVC/1/Root
Error 26105. Failed to create web application.  (-2147164145
/LM/W3SVC/1/Root      )
MSI (s) (24!18) [12:42:39:460]: Product: MyProduct -- Error 26105.
Failed to create web application.  (-2147164145   /LM/W3SVC/1/Root
)
WriteMetabaseChanges:  Error 0x8004e00f: failed to create ASP App
...

However, if I remove the attribute "Isolation" out of the
iis:WebApplication element, it installs without any problem (snippet
taken from the log file with LOGVERBOSE=1):

...
WriteMetabaseChanges:  Writing Metabase Value Under Key: /LM/W3SVC/1/
ID: 1023
WriteMetabaseChanges:  Writing Metabase Value Under Key: /LM/W3SVC/1/
ID: 2021
WriteMetabaseChanges:  Writing Metabase Value Under Key:
/LM/W3SVC/1/Root ID: 3001
WriteMetabaseChanges:  Writing Metabase Value Under Key: /LM/W3SVC/1/
ID: 1015
WriteMetabaseChanges:  Creating ASP App: /LM/W3SVC/1/Root
WriteMetabaseChanges:  Writing Metabase Value Under Key:
/LM/W3SVC/1/Root/ ID: 2102
...

This is reproducible both if iis:WebApplication is under iis:WebSite or
not.
Please, suggest.
Thank you.

-- Yan


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