From what I see in Log 1, the machine is not as clean as you think. FindRelatedProducts is finding a previous installation of your product and telling RemoveExistingProducts to uninstall it before installing your new version.
I've seen situations when the component rules are violated that MSI thinks a file doesn't need to be installed but the file then gets uninstalled by the removal of the product being upgraded and the file ends up not being installed. By uninstalling and reinstalling you break that up into two steps so that when the second install evaluates the need for the file it comes back as yes and gets installed.
The fact that this is an OCX COM server is just a coincidence and not really relevant to the real problem.
I'd need the MSI already installed and the MSI upgrading to give you specific remedys.
Action start 14:55:44: FindRelatedProducts.
MSI (s) (A0:18) [14:55:44:119]: PROPERTY CHANGE: Adding PREVIOUSVERSIONSINSTALLED property. Its value is '{08D8BF6E-E399-4B8A-8B8D-7DFF68F81131}'.
MSI (s) (A0:18) [14:55:44:119]: Skipping action: ERRCA_CANCELNEWERVERSION (condition is false)
MSI (s) (A0:18) [14:55:44:119]: Doing action: VSDCA_VsdLaunchConditions
Action ended 14:55:44: FindRelatedProducts. Return value 1.