Have you looked at the "Installation Designer" product?
No as thats not available to me. If there would be a way that i could just place the engine file into the install sorce that would be great.
No, the only way to replace the file is MID.
outside of MID you can review the installation guide
Page 19 of the installation guide
tested with VSE 8.8 P5 and the switch RUNAUTOUPDATE="" does not work. Looks like this is a known behavior or made by design.