I think that's an error in the 8.6 installer. If you run it over an existing 8.x install it will run in update mode and only replace existing files instead of adding missing ones. It's a shame it doesn't distinguish between (optional) tools and key elements when doing so. To force install mode you need to uninstall first or hack into the registry.
Also, there is a confirmed error in the installer if you upgrade from a previous version on Windows 9x/ME. Somehow the existing path to C:\PVSW\BIN gets replaced by C:\PVSWbin (note the missing backslash). Although annoying, this is easily repaired by editing the corrsponding line in AUTOEXEC.BAT.
But the missing path phenomenon mostly occurs when using NetWare servers. The logon script often contains statements such as "MAP S1:=SYS
UBLIC" which effectively replace the corresponding positions in path with a new drive letter, top down starting with Z:. If you are running NetWare you should edit your logon script and replace every occurance of "MAP Sn:" to "MAP INS Sn:" which will insert rather than replace.
I'm not sure if KIX allows similar statements on Windows logon scripts. If you are using KIX I'd like to hear.