Yeah that's still a permissions issue. The user/account did not have write permissions so instead of just erroring out its trying to preserve legacy software by taking the change and ignoring it silently. Who knows why MS chose this path but the fault is still on the installer.
The fix is either use the proper locations for app data OR change permissions on that folder. its not some insurmountable hurdle that forces you to use weird locations. If permissions were correct then it would be fine. Heck, install Apache on windows. Everything just works in the proper locations because they didn't half ass everything.
Its also worth mentioning that this change came along when Vista was released; prior to that this didn't happen, yet crappy installers pulled the same shit: install to c:\, attempt to write to c:\windows\temp, etc and other DOS/Win95 legacy habits.
Ironically, Vista helped fix all this. Now I see installers for open source or community projects uses proper locations much more often than not. I guess people got sick of the UAC prompts and corporate admins were complaining about how all these arbitrary writes weren't compatible with their limited users.