When using XmlConfig to remove an element explicitly, i.e. by marking action='delete' (I didn't test this on uninstall), the installation always fails.
Looking at the source (src/ca/wixca/dll/XmlConfig.cpp), when removing an element (on line 845), the IXMLDomNode->removeChild method is used. Looking at the MSDN page for said method (http://msdn.microsoft.com/en-us/library/ms765491(VS.85).aspx), it clearly states that passing NULL for the second parameter will result in a E_INVALIDARG error.
This means that the element is not removed, and the Installation fails.
I am using version 3.0.4227.0 of WiX.
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