I think what you want to do is known as bootstrapping. I'm pretty sure this is possible with the .Net installer, but I don't have much experience with it. I've bootstrapped the .Net framework and windows installer but not much else. In VS 2005 I'm pretty sure there are some simple options for dependencies and bootstrapping. For VS 2003 I seem to recall using a tool by Microsoft to get the job done. I don't have links for you (sorry) but hopefully that'll be enough keywords to get you started.
On a side note, are you allowed to distribute Photoshop the way you are trying to distribute it (without the CD I mean)? Be careful about legal stuff with that.