This is exactly how AppX/MSIX packages work, with C:\Program Files\WindowsApps (by default) being pretty substantially locked down. They even use filesystem/registry virtualization by default to isolate packages even further from each other. They also have solutions for framework packages and extensions though I haven't tried those out and suspect they have annoying practical limitations around edge cases.

Of course, a decade later almost nobody uses those because they botched the rollout by limiting AppX to the Microsoft Store and an entirely new poorly documented and very restrictive set of windows APIs and app frameworks. They've made huge progress on all of those problems with MSIX to the point that it's a reasonably good and easy to use choice for most apps with some neat benefits like updates only downloading the changes between versions. Of course if your app pushes the boundaries of the sandbox or capabilities or runs into a bug it becomes a huge pain.