As you stated, Chrome will ask users to confirm whether or not they want to add an extension that has been installed via a preferences file or via the Windows registry. This is a security measure to prevent other applications from adding extensions to the user's browser without their knowledge or consent.
I'm not quite sure what you mean by "install locally." If the user is being prompted to confirm whether or not they want the extension, then the extension has been "installed" in Chrome and automatically disabled as expected.
Simeon - @dotproto
Chrome Extensions DevRel