There seems to be an issue with the 'Never Overwrite' attribute for registry key components. When checked, and the installer is upgrading an exisiting version, it will remove the reg key instead of leaving the key as it was. It seems that either the logic is backwards with the attribute, or the label shoule read, 'Always Remove'.
This is only an issues when it's upgrading an exisiting version. Doing an uninstall on a previous version and then installing the newer on, the reg key component is there.