For thumb-drive you can use the zip archive instead.

What the installer does now is write all files to the directory under program files, instead of also writing python scripts to a separate directory. Configuration files written while blender is running still go to the same directory as before.

It's not clear to what you mean exactly by thumb-drive usage, but it should still be possible to download the .zip version, create a "config" directory in the unzipped folder, and then all configuration files will be written there without touching any other folders in the system.

--create a "config" directory--

Yes, that does work, though undocumented and cumbersome.

"Thumb drive usage" refers to installing an application on a memory stick/flash drive/thumb drive/usb drive and running it from there after you insert the flash drive into a computer where you do not have admin rights.

One of the strengths of Blender, IMHO, was that you could simply unpack it and run it on machines where you did not have administrator rights. We should either fix this or document how to do it.

Especially useful in places where they get paranoid about 'unauthorized' applications leaving telltale deposits in Doc&Settings.

The other advantage of the thumb-drive installation is that all of your addons and settings travel with you, to whatever computer you are on.

The point about documentation I agree with, so I've added it in the manual:
http://wiki.blender.org/index.php/Doc:2.5/Manual/Introduction/Installing_Blender/Windows

But further, I do not understand how the 2.58 installer changes make a difference here. You should still be able to choose where to install Blender, it's just that there is no longer a choice for a secondary folder, because it now installs everything in one folder.

Ok, starting with a fresh install of Blender 2.58 Windows-32 (This happens with the installer and the ZIP version)

Install/Extract to a thumb-drive. In this case F:\BlenderTest\
Navigate to F:\BlenderTest\ and launch blender.exe
Console will complain "Info: Config directory with "startup.blend" file not found." (not a problem).

Now add an Addon, for example, io_smd_tools.
After installation, activate it, and 'Save as default'
The console will spit out "trying to save homefile at C:\Documents and Settings\####USERNAME###\Application Data\Blender Foundation\Blender\2.58\config\startup.blend ok"
Quit Blender

Examine the C:\Documents and Settings\####USERNAME###\Application Data\Blender Foundation\Blender\2.58 directory
You will find the configuration settings...

..\config\startup.blend
..\config\bookmarks.html

And the addons you just installed...

..\scripts\addons\io_smd_tools.py
..\scripts\addons\__pycachce__\io_smd_tools.cpython-32.pyc

If you take the thumb-drive to a different computer, any custom addons will need to be reinstalled.

That is the problem.

Under the 2.57 installer, selecting 'Use installation directory' made the addons resident in F:\BlenderTest\2.57\sctipts\addons\

Ideally, it would be nice to have the option of having the ..\config in the application directory as well for portable use.

Especially when the only thing required to make this happen, is plop an empty 'config' folder in there before launch.
Blender is quite happy to keep everything resident then.