Without knowing what version of the MSM or CVI you are using I will have a hard time answering you. But the main reason that you get a 2705 directory error from this merge module is because you do not include the dependent merge module (CVI6 niPaths.msm or CVI7 nimetautils.msm). these dependent merge modules fill out the directory table for NI merge modules and installers.
Hope this helps,
Jeff
NI