You can't execute another MSI while running a MSI. I don't know why Business Objects/SAP did not create a merge module (MSM). But... here is how I got it to work.
In you setup project, go Properties > Click on Prerequisites. There you can select the Crystal Reports for 2008. But... this is built into the bootstrap so you have to run the setup.exe.
If you select the 2nd option "Download from same folder as application" when you build the setup in your bin folder it creates the folders you can include on a CD or upload to a web server. The 1st option download from vendor website seems very slow (but works).
If you must run the MSI from within, I seen some article somewhere about creating a
VB script that calls the MSI; but, I never got it to work