In my case the the selected instalation path for this extenstion was as following
C:\Documents and Settings\shaukat.mahmood\Local Settings\Application Data\Microsoft\VisualStudio\10.0\Extensions\Microsoft .............................................. and so on
However after doing some RnD on this topic I have devised a solution as following,
Open devenv.pkgdef located at path <VisualStudioRootFolder>\Common7\IDE\devenv.pkgdef
The file can be opend in Visual Studio IDE, or using any text editor like notepad.

This is path of Master PkgDef file that defines the well known locations for VSIX extensions.
Now modify the Value for "UserExtensionsRootFolder" as folloowing
"UserExtensionsRootFolder" = "$RootFolder$\Common7\IDE\Extensions"
This will direct VSIX extension installer to install the extension under root folder of visual studio instalation.
After making this change your extension will be installed successfuly, but tehre is one issue, you will lose all the existing extensions taht are installed under ...Document and Setting \ Applictaion Data ....... folder, to keep these extensions working append $AppDataLocalFolder$\Extensions; value to PkgDefSearchPath key in devenv.pkgdef file.
And finaly you devenv.pkgdef should look as following
[$Initialization$]
"ApplicationExtensionsFolder" = "$RootFolder$\Common7\IDE\Extensions"
"PkgDefSearchPath" = "$AppDataLocalFolder$\Extensions;$ApplicationExtensionsFolder$;$RootFolder$\Common7\IDE\CommonExtensions;$RootFolder$\Common7\IDE\devenv.admin.pkgdef;"
"UserExtensionsRootFolder" = "$RootFolder$\Common7\IDE\Extensions"
"RegistryRoot" = "Software\Microsoft\VisualStudio\10.0"
