InstallAware

Am I assuming incorrectly that when you set a button on a dialog box action, in this case one that I have titled Exit, to "Cancel Setup" that it will prompt you "Do you really want to cancel" and then if "Yes" is selected it will exit the installer?

Because I have mine set that way and it just keeps on moving through the rest of the script as if nothing happened.

You have to check in your script for the return value of the Display Dialog command - the pre-built scripts illustrate this for you.

Ahh so InstallAware dialogs behave slightly differently from Wise Installer dialog builds in that there is no seperate dialog script (somewhat like a mini dialog include script) for each dialog.

So I want to build "If..Then" type logic directly after displaying a box for things like Cancel Setup or even launching an application in the script, correct?

Edit:

NM I see the return of the modal (Next, Back, Cancel) can be set in a variable.

But that brings me to another question, are these the only actions that can be "captured" into a variable?

Yes.
As for your second question. If you want to capture the button that was clicked on a dialog, you are not limited to those three. You can capture any button click.
If you want to set interactive behavior inside a dialog (ex: license agreement checkbox enables Next), or if you want to record values of input fields (ex: a custom text box), double-click the relevant control for that, and use the window that appears which provides you ample choices.