When publishing a Clickonce application though visual studio, there's a button "Prerequisites..." where you can choose the application prerequisites.
As far as I understand, the publish action creates a Setup.exe that verifies if the prerequistes are installed, install them if they aren't and then run "application_name".application.
Does mage.cmd support the prerequisite feature and how? Or do we have to create something like setup.exe by hand when doing builds outside visual studio?
As far as I know, Mage does not have any support for prereq generation like Visual Studio does. It makes sense, the bootstrapped setup.exe that VS creates doesn't have anything to do with ClickOnce other than launching the app when it's finished.
You should be fine using VS to generate your Setup.exe and using Mage to create your deployments. The Setup.exe should rarely change so it shouldn't be too much of a hassle.