This is really a distutils bug (http://bugs.python.org/issue6792), but it might be possible to implement a workaround, e.g. create a separate 64-bit installer binary.
The issue is that the installer is a 32-bit executable, which means that on 64-bit Windows it reads from HKLM\Software\Wow6432Node not HKLM\Software - and if you installed the 64-bit python binaries they create the Python registry key under HKLM\Software so the 32-bit installer can't find the python install location and therefore bombs out.
Until this can be fixed, a workaround is to manually add an InstallPath key in the place where the 32bit installer is looking for it, i.e. [HKEY_LOCAL_MACHINE\SOFTWARE\Wow6432Node\Python\PythonCore\2.6\InstallPath]
@="C:\\Python26\\"
We're recommending use of standard pip/wheel installation in Python 1.4+