Unfortunately we cannot replicate this behavior and it is quite strange as Advanced Installer does not require for VS to be installed on the machine.
For building/including merge modules you should have installed only Microsoft SDK 7.0, not 7.1. Do you have it installed? This SDK contains additional tools used by Advanced Installer,
for example on patch creation or other processes.
Also, can you look in Event Viewer to see if the OS gives you any details about the repair operation trigger on VS 2010. To get more information from
Windows Installer you can enable automatic logging, as explained at the end of the following tutorial
One more thing, is this problem appearing with any random MSM file (created with AI or VS or downloaded from a certain vendor) or only with a specific one?