I just pushed an update that will hopefully help track this down. It will check for existing data overrides in the directory it is pointed to, and show a warning in the log box about this. IT WILL NOT automatically remove, rename, or otherwise attempt to resolve this for you. It is your responsibility to go to the indicated folder, and remove any conflicting files.
I also added a check for a valid city install, as some folks have been pointing the tool at either a subfolder, or just not the right folder.
Finally, I added an option under "Tools" "Upload Support Bundle" this will prompt you for your forums username (so I can associate a bundle with a user), which will contain some basic info about the folder you've told the installer is your City of Heroes install. It will check permissions on subfolders, it will check the launch params for the correct assetpath, it will check the data folder for overrides. I hope this will help in debugging these odd issues.