Hi,
Thanks for the detailed report.
You will only be prompted for the arduino location if it has not previously been set. You can change it in Tools>Options>Application Locations
It sounds like the addin is having problems loading. You could try running the resetaddin as detailed below but I am not sure this will allow it to load correctly.
The invalid setup message was added to the plugin for the couple of users that were hitting this problem, so that we could more easily know when we were hitting this problem. Otherwise things just didn't work as you have also described.
This is a Visual Studio problem and possibly connected to Visual Studios use of OLE for the command bars and menus. To cut a long story short I would initially suggest running a windows update and ensuring that any other versions of microsoft applications and especially visual studio are fully up to date with service packs.
Can you confirm if you downloaded atmel with shell or without, which version of atmel 6.1 you have installed, which version of windows you are using and when you last ran all the updates and applied all the service packs?
Running the visual micro or atmel installers will not fix this problem (I am sorry to say), in fact the mv installer is very simple and you certainly have it installed correctly.
Looking forward to an update
Thanks
/resetaddin ps: please also confirm what other extensions or addin you have loaded in atmel studio. you can see these via Tools>Addin manager and Tools>Extension Manager