I broke down and bought a PRS-505 yesterday while I was in Pennsylvania on business. Well, I was in Philly and drove 20 miles to the Sony Style store in King of Prussia.
I just wanted to relate that the installer fails on my brand new 64-bit Vista installation.
I was going to capture MSI logs and maybe open the installer up in ORCA and poke around (since part of my job is writing an installer for an application I develop). But then I decided to just install it in an XP Pro VM and then copy the resulting files. That seemed to work just fine.
I copied the C:\Program Files\Sony\Reader directory to C:\Program Files (x86)\Sony\Reader. Created a shortcut, and ran it. It worked just fine.
I was able to authorize my computer and my device. Download free books and download a purchased book.
I can only assume that the installer failed because it was trying to load the older driver for the PRS-500 onto the system. I can't say for sure since I didn't get around to any logging.
Anyway, it works and I'm happy.