Probably your scenery.cfg has has an illegal line with a syntax error. FSX wouldn't mind much (you'll simply not see the affected scenery), but the installer can be confused.
If you could send me your scenery.cfg by email, I can fix it for you.
The scenery.cfg for FSX is located at:
%ALLUSERSPROFILE%\Microsoft\FSX (just type this Start button->"Run..." in XP or the blank search space in Vista, then press Enter