That’s your problem right there. NSIS was great back in the Windows 98 days, but is really showing its age for Xp and especially Vista installs. These days, though, all the cool kids use WiX.
If you look at the code that “should” append the path, then clearly there is some failure case there. I don’t know if you’re talking about the NSIS source, or the actual NSIS code. If you’re just telling NSIS to do it, then there might be a bug in NSIS (not impossible, given that this bug has happened to me about a year ago from some other installer).
Having your system PATH clobbered is clearly a very bad thing to happen to a machine – a less command-line savvy user might need to re-install the OS and all applications to recover!
But, anyway, use WiX. It generates highly compatible MSI installers, and is open source, well maintained, and because a bunch of MS groups use it, it tends to be low on bad bugs like this. The only draw-back is having to learn the WiX schema.