I myself needed to include the MSXML3*.* and had a tremendouse nightmare using the merge modules in ISE4.0. So much that I did not use them at all. I added the MDAC 2.7 SP1 at the end if my install. (Problem solved.)

I can honestly say, that using the merge modules was more of a nightmare than a feature. I did not have time to solve my issues with them and used other sources for my files.

(.MSM has a mind of their own.)