Most desktops in my organization have strict configuration restrictions, but I need to let some users (software engineers) install software on their machines and in folders other than the default selections. How can I make exceptions for the software engineers?

On the engineers' machines, go to the HKEY_LOCAL_MACHINE\SOFTWARE\Policies\Microsoft\Windows\Installer registry subkey and add the EnableUserControl value (of type REG_DWORD). Set the value to 1 (the value is 0 by default). This value lets users completely dictate installation parameters in much the same way an administrator can. Please note that adding this value violates the typical security of Windows Installer. Make absolutely certain that you understand the consequences of what you're allowing and that the users understand the basic installation-rule exceptions that you'll accept.