I am using
I also have a situation where the attempt to close and reopen applications will always fail. A reboot is required. I attempted to use all of the solutions offered here. None of them worked. I was able to resolve the issue simply though. This article was the clue. https://msdn.microsoft.com/en-us/library/aa369546(v=vs.85).aspx
I added a condition to the InstallValidate standard action that always resolves to false. The action never runs. The standard action only deals with disk costing and open processes, Stopping the action from being called stopped all offers to close things. I also had to set the Windows Installer REBOOT property to FORCE to get the prompt to reboot at the end of the install.
My application has a small disk footprint. If having my install fail later in the process because the disk is full would be a big problem, I would find a way to do costing myself.