I got started on doing a developer's blog a while back, and looked forward to giving folks a little more insight into the product from the dev's point of view. I'm responsible for both UI and now Setup - so life has been busier than when I started those entries... but hopefully I'll manage to get back into it.
Speaking of setup... The setup team has been working very hard on issues learned from WSUS 2.0 SP1, and we hope upgrades to WSUS 3 will go much more smoothly. Make sure you check out the ReadMe.htm for issues, and of course always do the "best practice" of making backups of your database. This beta isn't intended for deployment, but I hope some of you will use copies of your databases and send us feedback on your experiences upgrading in a test environment.
Looking at the guts of the setup - we've gotten down to a single MSI (instead of the multiple from WSUS 2,) and started streamlining many of the custom actions. The Windows Installer team had an old mantra from when I worked with them: "Custom Actions are Evil!" - and it's true. We're paying special attention to these as we continue, and doing what we can to take better advantage of built-in actions in the engine.
Check out WiX (http://sourceforge.net/projects/wix/) - it's a great toolset, and getting better all the time. Rob Mensching and I both worked together in the Windows Installer team when he first joined Microsoft, and he continues to do great things.