<p>It turns out install shield doesn't support file download resuming.</p>

<p>Is there a .net component that provides this functionality?</p>

I don't think so,but it's not that hard to write one . There are a lot of
HTTP Clients
already . All that you would need to do is checking to see if the web server actually supports resuming . Check this blog entry for a little info about HTTP and download resuming :
http://www.west-wind.com/WebLog/posts/244.aspx
All you would need to do is store the number of bytes read so far somewhere ( file , database ) , and read that when you're starting your application again . Be sure to check the md5 for the file ( if it has one ) , to ensure no errors occured .