Setup projects, GAC, and Merge Modules

[Wayne Sepega]

We currently are developing an enterprise framework and I am trying to
create a set up project for this. Currently I have a merge module that has
all of our assemblies set to go into the GAC, and a test set up application
with a text file in it and the merge module. Some of the assemblies have
references to other assemblies in the framework, so under dependencies I've
right clicked and chose exclude.
When I run the set up application the assemblies get deployed to the
application directory for the main set up app, but not installed into the
GAC.

I have the following questions:

1) why wouldn't they get installed into the GAC? I didn't do anything
special to the merge module other than add the GAC folder, place all the
assemblies in it, and remove the detected dependencies except for the 2.0
frame work.

2) I'm thinking that I shouldn't use a merge module, but rather a MSI
install for the Framework, but how to add a dependency to the application
for our framework?

Thanks
Wayne