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Found my problem, which I'll share in case it helps someone in the future. So one registry line was causing the problem. Under Computer\HKEY_LOCAL_MACHINE\SOFTWARE\WOW6432Node\EA GAMES\The Sims 2 there was an entry called 'EPsInstalled' and its data was ",Sims2EP2.exe,,,,,,Sims2SP4.exe,,,,,,,,,Sims2EP9.exe". Turns out EP9 is actually M&G, so I tried removing that part of it (so I was left with ",Sims2EP2.exe,,,,,,Sims2SP4.exe"). Only then it finally accepted that M&G wasn't installed.
"It is easier to fool people than to convince them they have been fooled." - Mark Twain
Truth will not fear scrutiny.