Question: I'm looking at deploying some software via GPSI and the current version of the software is distributed as a .exe so I need to convert it to an MSI file.

furthermore, why does MS still distribute some of its software (WMI Tools) as .exe

Answer: 
The type of tool you're looking for is called an Application Repackaging tool. The process would include capturing an installation (take a machine snapshot, run your installation and make customisations, then run a second snapshot to calculate the differences) then compiling the captured data into MSI format.

The following are some free tools to perform these tasks, in order:

1. [AppDeploy Repackager](http://www.appdeploy.com/tools/repackager/): Use this to capture your installation and create an MSI from the captured data. If your app is reasonably simple then this may be all you need.
2. [Microsoft Orca](http://support.microsoft.com/kb/255905): Use this to edit the MSI that has been created with AppDeploy Repackager. You will need to know how MSI's work to really make the most of Orca. Microsoft's [Installer Database Reference](http://msdn.microsoft.com/en-us/library/aa369398(VS.85).aspx) is the definitive source for information on MSI contents.

As for your second question: You will find that sometimes vendors will supply an MSI wrapped in an executable, so if you run the .exe you might be able to dig out the MSI from a temp directory.
It's not free but if you have any Visual Studio licenses, that has a great MSI packager available in it.