I'm also interested in this-- being able to create msi files seems like a necessary feature for a .NET build tool.
It sounds similar to the the assembly plugin, where you also write an xml file that says what goes in the archive. That also works best as a separate module that builds at the end.
The plugin itself will probably be closer to the many other plugins that wrap a command-line tool.
I looked back at NMaven and found some source code: https://svn.apache.org/repos/asf/incubator/nmaven/trunk/plugins/maven-dotnet-wix-plugin/
On your questions...
I see it pulling in the needed files as dependencies from the local repo. So perhaps the xml file for wix would end up getting generated, or at least post-processed a bit.
Or maybe you would dependency:unpack everything it needs, and then the paths to everything would be relative to the current directory, under target.
We can probably start with a hard-coded wix xml config file and back up to the point that it's all configurable.
What do the developers think about starting on this here?