Automated release script and Visual Studio Setup projects

The low cost solution is to switch to using ClickOnce, which you can automate using MSBuild. But if you still need to create a Windows Installer package, you will need to convert your project to WiX (pretty straight foward) and build that with your solution.

This will get you started: Automate Releases With MSBuild And Windows Installer XML

I've used WiX a little bit before, and generally I found that it's great once you figure out what to do but there is a steep learning curve. If you spend a solid day going over the WiX tutorial you should be be able to get 80% of your setup working.

WiX Toolset Tutorial